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Arrowpoint Partners Buys Aster Investment Management

Vanguard launches international-bond fund, FPA Crescent picks up 2 new comanagers, and managers depart at GSAM, Buffalo, and BlackRock. Also, Matthews to close its Asia dividend fund, and Morgan Stanley set to launch a global quality stock fund.

Morningstar Fund Analysts, 06/06/2013

Arrowpoint Partners, the Denver-based investment firm, announced it is buying Aster Investment Management, or AIM, the advisor behind the Meridian Funds. The price of the deal was not disclosed.

The acquisition marks a return to the mutual fund world for David Corkins, Arrowpoint's founder and the former well-regarded portfolio manager of Janus Fund JDGAX, Janus Mercury (now Neutral-rated Janus Research JRAAX) and Neutral-rated Janus Growth & Income JDNAX. He formed Arrowpoint in 2007 after resigning from Janus, which was a blow to that firm at the time, as he generated fine records at his charges, and which was followed by other high-profile departures. Indeed, Arrowpoint's small but growing staff includes several Janus alumni such as Chad Meade and Brian Schaub, who comanaged Neutral-rated Janus Triton JGMAX between 2006 and 2013 and Janus Venture JVTAX from 2010-13 to strong records that easily exceeded the results of their small-growth peers. Up until now, Arrowpoint had been managing $2.2 billion in assets in separate and institutional accounts. Meridian's $2.9 billion will double the assets under management and give the firm access to retail investors.

For Meridian, the deal marks an end to a tumultuous 16 months for the firm. In February 2012, Meridian's founder, Richard Aster, died unexpectedly. In the wake of his death, AIM installed Neutral-rated Meridian Value's MVALX lead manager Jamie England as the lead on Neutral-rated Meridian Growth MERDX and Meridian Equity Income MEIFX. The funds' board then canceled AIM's contract and rehired it on an interim basis until shareholders could approve a new management agreement. That came in mid-2012. Since then, though, the firm has searched for a way to cash out Aster's estate, which accounted for the largest ownership stake in the firm.

The deal will have a profound impact on how the Meridian funds will be run. Meade and Schaub will take over Meridian Growth, which had been led by Richard Aster for 18 years before his death. The fund's strategy of buying small- and mid-cap stocks that can grow earnings at least 15% a year will be replaced by the process that Meade and Schaub used at Janus Triton and Janus Venture, which stressed competitive advantages, consistent cash flow growth, and attractive valuations. Their process often led to distinct sector weightings versus an index and peers. Meridian Value and Meridian Equity Income will remain in the hands of the managers at Aster Investment Management, with England remaining as the lead on both. William Tao, who was a comanager on Meridian Growth, will move over to help run those two funds. The funds' respective strategies won't change.

The deal should calm a lot of concerns about the Meridian funds. Even though Meridian Growth's strategy will change somewhat, it is now in the hands of two capable managers, which could give it a needed shot in the arm. It also means England can go back to concentrating on Meridian Value, a fund he has helped run the past 12 years. More important, a sale of the firm may give shareholders confidence the funds are on solid footing. Indeed, more than $800 million had exited the Meridian funds over the past year. Corkins and team will now have to convince shareholders to reverse that trend.

Vanguard Launches International-Bond Fund
On Friday, May 31, Vanguard rolled out a passively managed, broad international-bond fund: Vanguard Total International Bond Index Fund (Admiral shares: VTABX; Investor shares: VTIBX). 

Vanguard finally made good on its promise to roll out the fund, which tracks a broad, Barclays-managed index of investment-grade corporate and government debt issued in more than 50 countries. Vanguard launched the fund with Investor and Admiral share classes, costing 0.23% and 0.20%, respectively.

Then, on Tuesday, June 4, Vanguard launched an exchange-traded fund share class for the fund, Vanguard Total International Bond Index ETF BNDX, which also costs 0.20%.

Morningstar fund analysts cover more than 1,700 mutual funds and write regular commentary covering fund industry news, fund investing trends, picks, portfolio planning, international investing, and more.
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