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 London’s strategic position in the financial landscape makes it the world’s most important global financial centre.
London’s strategic position in the financial landscape makes it the world’s most important global financial centre. Photograph: Jason Hawkes / Barcroft Media
London’s strategic position in the financial landscape makes it the world’s most important global financial centre. Photograph: Jason Hawkes / Barcroft Media

Janus Henderson deal shows Brexit hasn't altered London's status

This article is more than 7 years old
Nils Pratley

City is the natural home for global asset managers and will continue to benefit from timezone and financial infrastructure

That’s the spirit. “The Brexit debate will be seen as a drop in the ocean in the timeline of our business,” says Andrew Formica, the (Australian) chief executive of Anglo-Aussie fund manager Henderson. After the merger with Janus Capital of the US, the combined company, managing $320bn of assets, will make its home in London. The firm will have two bosses – Formica will be joint chief executive with his Janus counterpart, Dick Weil – but the American will have to get out of Denver and move to the UK.

Brexit-worriers will point out that Henderson’s listing on the London Stock Exchange will be cancelled. New York has been given the primary listing and Sydney the secondary gig. True, but you can’t have everything and there is a particular wrinkle here. Some 60% of Henderson’s shares are still held in Australia and, since three listings would be silly, London was the obvious one to drop. The location of the head office was the important decision.

Formica’s analysis is worth noting for its matter-of-factness. Brexit hasn’t altered London’s status as the world’s most important global financial centre. The capital will continue to enjoy the benefits of timezone and financial infrastructure. Thus it is a natural home for an asset manager running operations in the US, Europe and Asia.

The calculation, we might agree, could be very different for those big banks or insurers who prize ‘passporting’ rights to operate across the EU single market. But there is no obvious reason for global asset managers to flee. Henderson’s shareholders will get 57% of the equity, and thus are the senior partners in this “merger of equals,” but London seems to have been preferred solely for its merit as a global hub.

Shareholders may be more worried by the decision to run with two chief executives. The Roman god Janus faced two ways, but having two chiefs is a notoriously tricky arrangement to make work. The task should be easier, though, with one head office.

Tesco: why we should be wary of US-style litigation

Photograph: Phil Noble / Reuters/Reuters

The Serious Fraud Office has charged three former Tesco executives with fraud and false accounting (the trio deny the charges), but some investors don’t want to let the matter end there. A group of 60 would like to be compensated for Tesco’s £263m over-statement of profits in 2014. They calculate they suffered collective losses of £150m when the share price fell and argue they are entitled to expect companies’ financial statements to be true and fair.

Nobody would dispute the point about expecting accuracy and purity. Jeremy Marshall, chief investment officer of Bentham Europe, the firm funding the litigation against Tesco, draws a comparison with second-hand cars. You would expect redress if the vehicle you bought turned out to have 10,000 miles on the clock rather than the stated 5,000. Well, yes, but this enthusiasm for US-style litigation is troubling for several reasons.

First, a litigation-hungry set of shareholders is seeking to gain at the expense of the other shareholders. That feels underhand. Second, in any share price movement, it’s hard to measure specific factors precisely. Tesco’s confession of an over-statement clearly contributed to fall in the share price, but by how much? How does one isolate secondary effects, like reputational damage?

Third, the argument that claims for compensation help to improve boardroom governance sounds like self-interested nonsense. The SFO, the Financial Reporting Council and other bodies exist to do a job. If they do it properly, they shouldn’t require assistance.

Sadly, we may have to get used to more such legal cases. One senior London fund manager said he would be happy if such US-style litigation remained in the US, but he felt obliged to participate because it would be hard to explain to clients why other managers had secured a cheque while he hadn’t. That is how momentum for litigation builds. The development is regrettable.

Philip Hammond’s ‘midlands engine’

Photograph: Carl Court/Getty Images

By the time he gets to his autumn statement, let’s hope chancellor Philip Hammond, above, has found some policies (and better jokes). Monday’s conference speech brought news of a £3bn package to increase the number of houses built in Britain – an ambition that has confounded successive governments – but there was nothing else to bite on.

The definition of the “northern powerhouse” remains as obscure as it did under George Osborne. Now we have Hammond’s “midlands engine”. In neither case, however, is it clear how productivity in those regions is meant to improve. Are there any targets behind these boasts? If a company chief executive was making such airy promises, the shareholders would be merciless.

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