Janus Henderson set to march into Europe with Tabula acquisition

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Global asset manager Janus Henderson has bought London-based Tabula Investment Management as it seeks to exploit growing demand for actively managed exchange traded funds outside the US.

Janus is already the fourth-largest provider of active fixed income ETFs in the US, according to Morningstar data, with $14.2bn of its $335bn of assets under management held in the structure.

It said the acquisition was driven by a push to “enhance its partnership with its UK and European client base, which is increasingly looking at active ETFs, and to reach key growing markets in Latin America, the Middle East and Apac”. Financial terms were not disclosed.

Europe’s near-ubiquitous Ucits funds structure is highly popular in much of Latin America and Asia, allowing funds domiciled in Europe to provide a springboard for expansion to much of the world outside of the US.

The ETF industry was once synonymous with benchmark-tracking passive funds but active ETFs have expanded rapidly in the US in recent years, partly because the American tax system has favoured ETFs over mutual funds, but also because active managers have lost their fears that the transparency inherent in ETFs would allow others to front-run their investment decisions.

Active ETFs held $530bn of assets in the US at the end of 2023, 8.5 per cent of the broader ETF market, according to Morningstar.

The trend is less advanced in Europe, where ETFs have no tax advantage over mutual funds, but interest in active ETFs has jumped over the past year with active ETF AUM increasing by €10bn to €33.8bn representing 1.9 per cent of the wider ETF market, according to Morningstar.

Take up has been stronger in parts of the Apac region, with active ETFs accounting for 29.4 per cent of the $93bn South Korean ETF market and 11.8 per cent of Australia’s $65bn ETF sector. In 2023 active ETFs took 86.7 per cent of all net ETF flows in Korea, according to Morningstar.

“The European ETF market is undergoing a significant transformation, growing considerably and mirroring trends observed in the US market where active management is increasingly being incorporated into the ETF wrapper,” Janus chief executive Ali Dibadj told analysts on a conference call Thursday. The company noted that nearly 10 per cent of European ETF launches last year were actively managed.

“This shift represents a considerable growth opportunity for asset managers looking to broaden the ways in which clients access their investment capabilities and capitalise on evolving client preferences in the European market,” Dibadj continued.

Tabula was formed in 2018 by Michael John Lytle and Stefan Garcia, who built Source into a $25bn ETF manager before selling it to Invesco.

Tabula itself is far smaller, with about $500mn of assets in fixed income ETFs, many of them badged as Paris-aligned, all of which are passive.

Lytle, who will continue as chief executive, said the plan was to launch a wide range of both active bond and equity ETFs in Europe, some based on Janus’s existing US investment products and some entirely new.

Janus will “certainly do some ETF launches off the back of the Tabula transaction,” chief financial officer Roger Thompson told analysts on Thursday’s call.

“I think we are just at the turning point of the European [active ETF] market,” Lytle said, with the likes of Robeco, BlackRock’s iShares, Eurizon Capital and Cathie Wood’s Ark Invest all having launched or planning to launch active ETFs in Europe this year.

Janus could have entered the European market under its own steam. However, Lytle said that doing so via an acquisition will have allowed it to accelerate the process by a couple of years or so, compared with setting up an operation from scratch.

Moreover Tabula, whose ETFs are listed across 10 European exchanges, already has relationships with 200 institutional investors, as well as a host of market makers and authorised participants, which create and redeem shares.

“Tabula’s existing infrastructure and ecosystem offers us instant access to an institutional platform that we believe will position Janus Henderson as a trusted and credible player in the European ETF market,” Dibadj said.

Additional reporting by Will Schmitt in New York.