Symbiotic relationships
This raises an interesting question. The consensus seems to be that fund houses which fall smack bang in the middle in terms of AUM, that are not broad enough to be a true generalist but too diverse to be a niche outfit, are the ones that will struggle to keep costs down while remaining profitable.
Is there only room in the industry for the behemoths and the boutiques in the future?
Mergers and acquisitions are never a cut and dry process – quite the opposite. They are almost always messy, complicated, time-consuming transactions, particularly in the asset management industry.
Five months on from the announcement of their merger, Henderson and Janus have encountered bumps in the road, including several senior departures from Henderson’s global equities and high yield bond teams.
“Whenever you get big mergers, there is always a risk of attrition, a loss of revenue and a loss of staff,” says Baird.
“In this case, one plus one could equal less than two or more than two. Asset management businesses are not simply two industrial companies you can crunch together.”
Another reason why joining two fund houses is a tricky balancing act is that the sector is filled with big personalities and egos, according to Baird.
“The asset management industry is full of prima donnas who don’t take kindly to being told what to do. It’s a bit like the movies or the professional sports world. There’s an element of star power involved in it.”
It is much easier for your star power to shine through when you have fewer people around you than if you are competing for attention on a bigger platform, he adds.
Also, combining two businesses together does not a successful company make.
