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Portfolio > Asset Managers

How Janus Henderson's New Boss Plans to Stem Outflows

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What You Need to Know

  • Janus' new CEO says the current environment favors active stock picking.
  • He aims to achieve more consistent inflows in 3 to 5 years.
  • Janus is investing in its liquid-alternatives unit.

Janus Henderson Group Plc’s new boss has a plan to revive the struggling money manager, whose clients have yanked about $130 billion since 2017. He’s leaning into active investing and pushing forcefully into alternative investments such as hedge funds and private credit.

In his first interview since taking over as chief executive officer in June, Ali Dibadj, 47, acknowledged the difficulties the London-based firm has faced and laid out the core of his turnaround strategy — devised after months of internal review by senior staffers.

Created in 2017 after the transatlantic merger of two storied asset managers, Janus Henderson aspired to build a large-scale fund manager able to fight the rapid shift to cheaper passive products. Instead, its assets under management shrank to $287 billion from $331 billion in 2017, and its clients have pulled money for the past 21 quarters.

Janus outflows chart via Bloomberg

Dibadj aims to stanch the bleeding by pushing into some of the most highly competitive areas of finance, a move he concedes will take time.

“We have a lot to do with our active business right now to deliver better results,” Dibadj told Bloomberg News, speaking from the firm’s new office in New York, where he was meeting with investors. He expects to show some positive quarters over the next couple of years, with the goal of having more consistent inflows over the next three to five years.

Dibadj — former chief financial officer at AllianceBernstein Holding LP — took over almost two years after activist investor Nelson Peltz’s Trian Fund Management built a stake in the firm that now stands at 19% and began pushing for change. Janus Henderson’s board selected the new CEO, a choice the activist investor said it “strongly supports.”

Active Bet

Dibadj, who splits his time between the firm’s London headquarters and its Denver base, launched his turnaround plan soon after taking the top job. In his first few months, he planned roughly $40 million in cost cuts, shook up senior management, announced plans to expand in Asia and South America and hired a team for investing in emerging market debt.

There’s more to come, he said.

Behind the scenes, a committee of 40 senior staff members met for months to understand what clients want from Janus Henderson and plot the revival strategy. At root, the plan bets that active management, which has lost ground to low-cost passive index funds for more than a decade, still has a bright future at the heart of investment portfolios.

BlackRock Inc., Vanguard Group and State Street Corp.’s asset management arm rode the wave of index-investing, and now oversee about $20 trillion combined. But Dibadj has no plans to build a major passive business, suggesting the current environment favors stock-picking.

“Pure indexing as a passive, the classic passive, to me is going to be much more difficult to deliver the best returns for our clients,” he said. “Picking haves and have-not companies — that divergence in performance is actually going to be much more important.”

At the height of the dot-com bubble, Janus Capital Group had a reputation for wagering on high-growth tech companies and beating competitors. Its successor, Janus Henderson, has an established presence in growth, tech and fixed-income funds. New areas Dibadj aspires to enter include large-cap value and municipal-bond fund offerings. The firm also plans to cultivate small funds that perform better than much larger rivals.

“We have a $500 million fund right now — it literally has the best one- two- and three-year performance than anybody else in the sector by far,” Dibadj said. “Its rivals are $5 billion. That’s a really big move for us if we can get there, and again it’s because it hasn’t been a focus of the team to grow.”

The firm declined to identify the $500 million fund, citing regulatory reasons.

Overlooked Division

Alongside Janus Henderson’s actively managed mutual funds sits a $20 billion division that hasn’t received much attention: its liquid-alternatives unit, which houses several hedge funds. In 2022, the unit had net inflows of $2 billion into products that include multi-strategy hedge funds and equity- and commodity-enhanced index funds.

“No one talks about it; no one hears about it,” Dibadj said. “We’re not betting everything on it, but it is one of the roughly 10 things we’re focused on.”

He’s investing in tech and marketing for the business and plans to bring in new teams and launch more hedge funds, hoping to at least double the unit’s assets in the next few years.

“There are a lot of subscale, very interesting performance hedge funds out there that don’t have a home and are looking for a home,” he said.

The last gap that Dibadj wants to fill is illiquid alternatives. Like other asset managers eager to expand into private markets, Janus Henderson is considering using private credit to augment its fixed-income business and products tied to mortgage-backed and high-yield securities. This move stems from client demand for such products, Dibadj said.

“We don’t have the skill sets internally to go into the private credit fund landscape,” he said. “We’re going to have to acquire those skill sets, partnering, buying or something in between.”

In the meantime, the numbers are looking a bit better for Janus Henderson. Assets rose for the first time in a year at the end of the fourth quarter, as investment gains more than offset the outflows. Its shares, which plunged more than 40% last year, have gained 18% so far in 2023.

“We have something very, very good,” Dibadj said. “It’ll take a while to get it running at its full potential.”

–With assistance from Peter Eichenbaum.

(Image: Shutterstock)

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