Business-favorable election results have been a tailwind for newly merged Janus Henderson Group Plc, offset by overhang of merger execution and the continued shift toward passive investments in the U.S., according to a top executive.
Votes in continental Europe that saw the defeat of certain candidates viewed as extreme eased uncertainty over the macroeconomic environment, Andrew Formica, co-CEO of Janus Henderson, said during a conference call to discuss earnings. The appetite for equity investment in that part of the globe grew as macro fears waned, and that gave Janus Henderson's sales a lift during the second quarter.
"We are seeing retail clients in Europe, particularly in continental Europe, looking to increase equity exposure," Formica said.
The second quarter saw net equity inflows among intermediary clients in the U.S. and Europe, and among institutional clients in the Europe, Middle East and Africa regions, he said. In the U.S., Janus Henderson experienced growing demand among intermediary and institutional clients for global, international and emerging market exposure, said Formica, who serves as co-CEO alongside Richard Weil. The Janus Capital Group and Henderson Group merger was finalized in May.
The company in the second quarter booked a year-over-year increase in earnings on a merger pro-forma basis, which was calculated with the two legacy companies' income statements combined as though they had merged by the start of the quarter. Aiding the results were profitability numbers that will probably not hold up, executives cautioned.
One of the challenges the company faces is the fact that advisers who distribute Janus Henderson investment products will be monitoring to see how the merger plays out, Formica said.
"That doesn't affect a lot of the institutional clients we've talked to, but that will affect some, and that will take a little time to be removed," he said. The shift toward passive products in the U.S. asset management market shows no signs of abating, he added. Passive investment strategies are cheaper, and the shift has driven down management fees in the industry overall.