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A Good Fit

Well-regarded David Corkins kept a low profile after leaving Janus—until he made a play for like-minded Meridian Funds.

Rob Wherry, 10/15/2013

This article originally appeared in the October/November 2013 issue of MorningstarAdvisor magazine. To subscribe, please call 1-800-384-4000.  

Aster Investment Management and Arrowpoint Partners were two firms on different trajectories.

Heading into 2013, AIM, based outside San Francisco, was still reeling from the sudden death a year earlier of its president, Rick Aster, who was synonymous with the firm he founded in 1977 and the Meridian Funds that AIM had managed since their respective inceptions. Almost $900 million had exited the funds’ coffers since Aster’s passing, and Meridian’s trustees were searching for an outside investor who could help the firm and the funds survive. “It was clear we were missing Rick’s hand” on Meridian Growth MERDX, says Jim Glavin, a board member.

Meanwhile, Arrowpoint, located more than 1,300 miles to the east in Denver, was enjoying a comfortable existence as an up-andcoming money-management firm. Arrowpoint was stocked with blue-chip talent who had left Janus, including co-founder David Corkins, who had skillfully managed $20 billion in accounts and at funds such as Janus Mercury (now Janus Research JRAAX) and Janus Growth & Income JDNAX. Since opening its doors in 2007, the firm’s assets had grown to $2 billion as it posted solid performance in its clients’ accounts during the 2008 downturn.

The firms, though, are now more closely linked than their predicaments or the distance on a map suggested. In May, Arrowpoint quietly bought AIM for an undisclosed sum. Mergers in the mutual fund world aren’t uncommon, but this one was notable for several reasons. In the minds of wary investors, it likely stabilized AIM, which was one of the best small independent fund companies in the United States when Aster was at the helm. The deal also signals that Arrowpoint is a firm worth watching as it enters the retail fund business and possibly adds to its lineup in the future.

While the union makes sense, there will be challenges to pulling off the marriage. First up will be the task of meshing the two firms. Arrowpoint agreed to retain a majority of AIM’s current staff. There will be a premium on communication because the two firms will remain in their respective locations: Denver and Larkspur, Calif. Maybe more pressing is the overhaul of Meridian Growth, a job that will fall to new hires Chad Meade and Brian Schaub, who posted a stellar seven-year record at Janus Triton JGMAX before leaving earlier this year for Arrowpoint. Then, there is the work of pulling the moving pieces together within the confines of a growing firm. Arrowpoint doubled in size to more than $5 billion after shareholders approved the deal in September. However, Corkins and co-founder Karen Reidy aren’t interested in creating another version of Janus. Instead, they have focused on attracting top talent, with asset flows a pleasant side effect.

“We wanted to be big enough so that we didn’t have to worry about raising money, but we still wanted to be nimble,” says Corkins. “We are always looking for human capital first and then an opportunity.”

Coming Together
In many ways, it isn’t surprising that AIM merged with Arrowpoint Partners. Corkins had met Aster through the years and respected the track record he had amassed before his death. Corkins was also acquainted with Michael Stolper, a Meridian Funds board member who previously served in a similar capacity at Janus. In addition, the two firms invested with a similar mindset: Buy financially sound companies with competitive advantages that are trading at a discount to their intrinsic value. When Corkins heard AIM was searching for a buyer, he and his team started poring over the holdings of Meridian Growth, Meridian Value MVALX, and Meridian Equity Income MEIFX. They found overlap between what the three Meridian funds owned and the companies they had analyzed for Arrowpoint’s own accounts. It was clear, says Corkins, “Meridian was a good fit in terms of philosophy.”

Rob Wherry is a mutual fund analyst with Morningstar.

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