Janus Henderson is on the precipice of change. Change, as it turns out, that it has been preparing for over almost half a decade. Announced earlier this month, global head of trading, Dan Royal, is set to step away from his role at the end of this year. The hier to the throne: Hugh Spencer.
The succession plan is remarkably unique and pays tribute to Royal’s character as a man whose love for his current company has driven his desire to ensure that his departure does not rock the boat. A rare commodity in the industry.
Sitting down with The TRADE, Spencer explains this plan of succession has been in place for several years, attributing its success to the planning and preparation that has gone into implementing it.
Hugh Spencer
New heads of trading have stepped up to the plate in three different regions. Spencer will take over from Royal as global head based in the US, Glen Pattinson will take over in London – following the departure of Richard Worrell to the London Stock Exchange at the start of this year – and Ryan Chan will take over from Spencer in his current role as head of the Asia Pacific dealing desk.
“When you have situations where you have change like this, it [global approach] means you’ve got continuity. Everyone is ready to step up. This is all internally sourced succession. This creates that continuity which breeds the strong culture that we have and ensures that when we replace at the junior trader level, we can confidently bring new skillsets in. That’s where we add people with a scientific approach,” says Spencer.
“I don’t know if there’s many firms that would allow a transition process like this to occur and promote it and be proud of it. The person really driving it and being a huge part of that is the individual leaving. I’ve got so much respect for the company and so much respect for him. You’ve got a global head who’s retiring but still so excited about his job that he really wants to make sure that the global team is left in a better position than it was before he left. It’s selfless.”
Janus Henderson’s global offerings use the same systems and regularly communicate. With the succession plan in place, Royal has been grooming Spencer to take over to ensure a smooth transition when he steps back from his role at the end of 2024.
“I have an open dialogue with Dan,” explains Spencer. “This is again a very deliberate plan of succession, so having a line of sight into the global projects, meetings, and interactions already is hugely helpful for me to try to understand the direction of travel required ultimately to then transition into solely being global head of trading. One of his [Royal’s] many legacies is going to be how seamless the transition is.”
Future focus
Spencer is set to move over to the US in the Summer and work alongside Royal for six months to get his feet under the desk. He tells The TRADE that his core focus going forward is establishing the credibility that Royal is known for both in and outside the firm. However, hints towards a more systematic focus once the new structure is settled.
“Leveraging the credibility that Dan and the company have built up over decades with the street [will be the focus] firstly, then with internal relationships and with the trading team globally,” he says. “If there’s any aspiring leader or anyone that wants more responsibility, you have to understand as you take steps in your career that you have to be more confident with delegating responsibility along the way when required.”
“We’ve always been thought leaders when it came to customisation or bracketing of algos. The next logical step given that we’re not necessarily a quant house, is to really take a thoughtful, deliberate approach towards being systematic. And this involves approaching the majority of our order types, not just focusing on the easiest orders on the pad.”
Do what you love
Royal has been Spencer’s mentor throughout the majority of his trading career, and Spencer attributes his move over to the buy-side – originally joining Janus Henderson in 2011 as an equity trader in Singapore – to him.
“He is hugely supportive. Massively empowering in terms of a leadership style,” explains Spencer. “He understands that to have buy-in from the junior trader all the way up to your heads of desk, you have to empower and encourage individuals. You have to know an individual’s strength and then realise that that’s what you should be utilising as opposed to just trying to tailor a desk to lean towards your own strengths.”
The pair share a love of trading. Royal is renowned for continuing to actively trade throughout his career, even in his role as global head of trading, and this is something that Spencer intends to replicate when he ascends to the throne.
Dan Royal
“How can you have credibility with your traders if you’re not trading the same things every day? How can you understand the issues that they’re having or the complexity of what they’re dealing with if you’re not dealing it with yourself? There’s no corner office approach at Janus Henderson. We’re active in the investment process. Why would you give up something you love?” he implores.
“There’s something to be said for coming in trading stocks and talking about these stocks with my fellow team members. That’s irreplaceable. There’s a quote that really resonates with me. ‘You have to hear the sound of the bullets whizzing by to really understand what your teammates are going through’ (former Duke Energy CEO). You have to understand the stress, the strain, the smells, the sounds, everything that’s going on a trading desk if you’re going to manage it efficiently.”
Spencer has some experience of trading the US but has spent the extent of his career so far in Asia across Japan, Hong Kong and Singapore. He confirms that one of his focuses for the initial part of his new role in the US will be getting his feet under the trading desk and expanding his knowledge on how to trade the region.
“From a trading perspective, I have some experience trading the US market, but that’s something that will just take time,” he says. “That’s just spending time on the desk trading every day, chatting with the traders, working with the street there.”
Board boys and pressure cookers
Spencer began his financial career at Bloomberg as an IT support engineer and later as a network engineer. It was visiting offices to fit panels and terminals that he realised he wanted to flip the coin and join the industry in a front-office role.
“I was fixated with the other side of the panel,” he explains. “I was fixing all these Bloomberg terminals and got to a point where I wanted to be the one making the decisions on the other side of those screens. Three of my uncles were stockbrokers in Canada, so it’s a family affiliation with markets.”
During a rugby game in Japan, he scored his first front-office role broking interest rate swaps – a role he says is not for the faint hearted but that has shaped his career to date.
“Starting in money broking… I wouldn’t advise it for everyone. It’s extraordinarily fast-paced and high pressure. You have to learn to calculate spreads and prices on your feet. I started in the pressure cooker which involved a room full of individuals yelling and screaming and shouting numbers and closing deals,” he explains.
“It’s proper board boy material. You’re up there writing numbers down, getting coffees, moving cars, booking restaurants. All of the stuff which that doesn’t happen to juniors anymore, for very good reason. That system generates a lot of turnover in the junior positions because no one wants to do it for too long.”
He later gravitated towards equities. As a self-confessed lover of writing and research, the validation around investment decisions and the intellectual discussion surrounding execution in the asset class attracted his attention.
“Each step [in my career] has brought me closer to understanding the thesis behind why people are investing,” he adds. “As I got my head in the game I really wanted to understand why someone wants to own this. That’s why each stage of my career has gravitated closer to that investment decision as a result.”
EQ vs IQ
Australian born and bred Spencer has spent his entire financial career to date in Asia – some of the most profoundly complex and fragmented markets globally. Operating as an international sales trader at UBS in Japan for almost two years, he moved to Newedge, part of Société Générale since 2014, where he spent two years as a senior sales trader in Hong Kong.
He migrated to the buy-side with his move to Janus Henderson in 2011 when he joined as an equity trader. He later became the regional head of trading in 2014 and took up his most recent role as head of dealing Asia in 2017. His desk focuses on equities, alongside some convertible bonds, FX, systematic futures and over the counter (OTC) derivatives.
For Spencer, it is the market structure nuance that has kept him in Asia for as long as it has.
“Because you’re doing regional, any news outside of Asia typically affects a country within Asia from a global economic perspective so there’s always something going on,” he says. “You’re going to learn something new every single day simply because you’re covering such a breadth of different countries. That is what keeps people engaged and makes people want to stay out in Asia and pulls people to work out in Asia.”
Traders core skills are split between emotional intelligence (EQ) and intelligence quotient (IQ), he explains. They must want to and be passionate about researching stocks and understanding market structure minutia while simultaneously fostering relationships both inside and outside of their organisations. When asked how the firm mitigates the complexity of markets, he stresses the importance of dialogue with exchanges, regulators and other buy-side firms.
“You’ve got to be able to understand and love market microstructure. You’ve got to understand the impact of regulation. You need to enjoy delving into minutia,” he says.
“There’s always going to be times when you need to lean on someone because you don’t understand a certain regulation and why you can or cannot trade this market. If you’ve got a strong relationship with those individuals who are microstructure or reg experts, do you really think they’re not going to stay back five minutes to help you out?”
“For a younger trader coming in, having a data science background is key. For traders who are more established, you can’t just roll your eyes when the topic of data comes up. You have to be willing to get out of your comfort zone. You have to put your hand up and ask questions to the people on the desk who know more than you.”
Central to the EQ side of trading is ironically taking emotion out of the equation, says Spencer. Emotions must be controlled in order to achieve the success. Emotions in the form of strong relationships generate better outcomes, but emotions relating to trading decisions create uncertainty, exhaustion and risk.
“At first, you can’t help it if you’ve got pride in your work, which often brings with it sensitivity. Over time, you learn that there are elements you can’t control. I can’t control the broader market as much as I wish I could. I can’t control what other market participants are going to do in a stock that I’m trading on any given day. Over time, the daily emotional roller coaster gets milder, and you start to develop a systematic process within your brain of how to deal with all these variables,” he says.
“I always tell junior traders, it doesn’t matter if you get a $100 million order or $100 order, you need to have the same emotional process with it. You can’t have a differing process because something has a greater magnitude of value. Once you get to the point where you remove emotion you start making much better trading decisions.”
“I try to make that entry and exit as efficient as possible and protect as much alpha as I can. I try to advise when it does and it doesn’t make sense from a trading perspective to do something, but ultimately that investment decision has greater ramifications than the trading decision.”
Spencer is now preparing for his family’s move over to the US. The next six months will prepare him for his new role as global head of trading – no mean feat at a firm with 24 offices globally and just over $352 billion in assets under management. Royal’s succession plan has pioneered a new of stepping away from the helm and the street should take notice. Long live the new king.