Asset Management: The Preliminary Return of Janus Henderson

One thing to start with: Campaign against Edinburgh Baillie Gifford has left festivals struggling to adapt to a new age of protest. In this FTWeekend essay, Henry Mance and I consider the question: if Baillie Gifford is not “clean” enough to fund the arts, who exactly is?

And a great pay package: Tesla the chief executive Elon Musk has secured an emphatic victory in shareholder votes on his $56 billion pay package and a proposal to move the company’s domicile from Delaware to Texas. The key to Tesla’s success at the polls was persuasion vanguardits largest shareholder, to change its position on the salary, after opposing it in 2018.

In today’s newsletter:

• The preview of Janus Henderson

• Why France’s far right is shaking up the markets

• Private equity accumulates $1 trillion in carried interest

Ali Dibadj: “Not all AUMs are creating the same”

In 1979, the fall of Shah of Iran blocked Ali Dibadj, then four years old, and his immediate family in Canada. His father, who had been working there, lost his job and they had to leave their home and apply for emergency visas to stay in the country. Dibadj’s mother went to work in a clothing boutique where she had once shopped, supporting her husband and two children, with the family living in a one-bedroom apartment.

Watching his parents pick themselves up and start again without seeking special treatment was a formative experience for Dibadj, now 49 and chief executive of the asset manager Janus Henderson — a well-known brand that has fallen on hard times.

“It taught me that you just have to roll with the punches and work hard and solve problems,” Dibadj tells my colleague. Brooke Masters in New York. “I always think about integrity and that eventually it will pay off.”

Dibadj faced numerous problems when he took over from Janus Henderson two years ago this month. The group, which has about $350 billion in assets under management, was created by a 2017 merger with the Denver-based. Janus based in London Henderson.

Often described as a case study in how not to do a merger, the deal was intended to cut costs and help two active managers fight off competition from cheap index-tracking funds. But her co-CEO deal fell through, leaving the combined company mired in internal strife. By the time Dibadj arrived in June 2022, Janus Henderson had endured 18 consecutive quarters of net outflows, assets were falling to a low of $275 billion and the firm was under pressure from activist investors. Nelson Peltz.

Read the full story here on how Dibadj, a former top-rated consumer sector analyst Bernstein Alliance, is slowly righting the ship at Janus Henderson. Part of this means encouraging the company to commit less to total assets under management and more to those with higher returns and higher fees.

“Not all AUM is created equal,” he said on Janus’ first-quarter earnings call. “We are very conscious of delivering value to our customers and delivering value to our shareholders, and not looking for so-called low-calorie AUM.”

Why France’s far right is shaking up the markets

It is often said that a week is a long time in politics. Given recent events in France, this is a huge understatement.

It’s been a little over a week French President Emmanuel Macron dissolved parliament and called two-round snap elections on June 30 and July 7 – a shock response to his centrist party’s cheating by Marine Le PenS ‘ National Assembly in the European elections.

Le Pen’s big-spending populist plans to help poorer and working-class voters with tax cuts and promises to lower the pension age may have been easy to announce when her French far-right party was in opposition.

Now the RN is waking up to the reality that these economic promises may be difficult to implement if it takes power after a snap election – and could turn into a “Liz Truss-style” obligation on the campaign trail.

Rivals from Macron’s party have already jumped ship, warning that a debt crisis like the UK gilt market turmoil in 2022 could follow if they end up in a power-sharing situation with the RN, similar to the fallout from plans by the former British leader for billions of dollars. of unfunded tax cuts.

Analysts have said it could be worse: the impact from RN spending would be twice as painful as it would have been under Truss, inflating France’s ratio of deficit to economic output by an extra 3.9 percentage points in year, according to the consultancy. Asterès.

Markets have already been rattled by the idea of ​​a far-right government running the eurozone’s second-largest economy with a protectionist and costly program at a time when public finances are already under strain. The gap between French and German government borrowing costs has widened to its highest level since October.

Since 2017, Le Pen has backed away from her plans to withdraw France from the EU. Analysts say the widening of the spread this time should be less intense in the coming months, but warned that France’s presidential election in 2027 could pose a greater risk to markets if Le Pen remains far ahead in the polls.

“In short, the main issue for markets is the potential fiscal implications of a Le Pen majority and not an existential one such as a potential Frexit,” he said. Meera Chandanglobal FX strategist at JPMorgan Chase.

Chart of the week

The world’s largest private equity firms have avoided income taxes on more than $1 trillion in incentive fees since 2000 by structuring the payouts in a way that subjects them to a much lower tax rate, according to a new study by University of Oxford.

Ludovic Phalippouprofessor at Oxford Said School of Businessfound that fund groups dedicated to private investment strategies such as buyout firms, venture capital, infrastructure and distressed debt had earned more than $1 trillion in so-called carried interest payments since the turn of the century, writes Antoine Gara in New York.

Such performance fees have for years drawn political scrutiny in the US and Europe, and Phalippou’s calculation comes as fund groups face a wave of renewed calls to close what prominent politicians characterize as a “loophole”.

The savings amount to hundreds of billions of dollars at current tax rates. Fees are charged at long-term capital gains rates that are significantly lower than income tax rates. For publicly traded firms, half of the fees are paid to shareholders in the form of dividends.

of Great Britain LABOR the party is vowing to close the loophole in a push led by the shadow chancellor Rachel Reeves, who previously called the tax treatment “absurd”. In 2021, she said she hoped to raise taxes on the private equity sector by £440m a year.

Earlier this year, Reeves pledged to press ahead with a plan to charge the top 45 percent income tax rate on profits that private equity firms make from successful deals amid growing backlash from lobbyists. industry. Currently, “committed interest” payments are taxed at the 28 percent capital gains tax rate.

In the US, recent presidents, including Barack Obama, Joe Biden and even Donald Trump have pledged to end the special tax treatment, but ultimately backed down amid industry pressure. In the UK, critics of Labour’s plan say rising tax rates will drive successful investment groups out of London just as the need to attract foreign capital is paramount.

Five memorable stories this week

The hedge fund Segantii Capital Management bet against Canada Goose after talking to one Morgan Stanley banker whose desk knew of an impending stock sell-off that threatened to hit the clothing brand’s share price.

Marshall Wace plans to open an office in Abu Dhabi in the coming months, joining groups including Winton Capital Management, Brevan Howard Asset Management AND Chris Hohn’s TCI in establishing a presence in the United Arab Emirates.

Stephen Lansdowneone of Hargreaves Lansdowne‘s co-founders and major shareholders have warned that “price is not the primary consideration” if private equity firms make a takeover bid for the investment platform firm this week.

Invesco is closing its independent UK equities team, previously led by the stock picker Neil Woodfordand its merger with its European division amid an industry-wide decline in interest in British stocks.

Consulting Group Mercer has agreed to buy a pension manager Cardanowhich oversees more than £50 billion in assets, in a bid to expand its UK business and capitalize on growing demand for workplace pensions.

And finally

The City of London is an anachronistic and little-understood beast, from the mayor and his roar to the mayor and the bricklayers. Don’t miss the deputy editor of Patrick Jenkins fascinating magazine feature that tries to understand the inner workings of the Square Mile.