Merlon takes centre stage after Fidante buyout

Fresh off a company rebrand and exiting Fidante ownership, Merlon Capital chief executive Neil Margolis says the firm’s independence has put the management in control of its own destiny.

Internalizing distribution

It was announced last month that the company had rebranded the business in light of exiting its ownership by Fidante. The boutique asset manager, which was founded in 2010, was already majority-owned by its principals, but Fidante held a strategic stake in the business which it exited in 2024.

Transitional arrangements regarding operational and distribution aspects of the business were initially in place to ensure a smooth handover but have now concluded and the firm operates its own internal distribution team. This is led by client relationship manager Jack Dooley who joined Merlon from Interactive Brokers in February 2026.

Speaking to Money Management, chief executive and portfolio manager Neil Margolis said the changes put Merlon “in control of our own destiny.”

The Australian equities fund manager was founded when it was spun out of Challenger in 2010 with a fund run by Margolis and his colleague Andrew Fraser having been running at Challenger together since 2005. Margolis spent almost six years as a portfolio manager at Challenger and, prior to that, worked as a senior equity analyst at Sanlam Investment Management and Alliance Bernstein.

As well as the buyout, founding principal Ben Goodwin stepped back from the business in late 2024 to join Aware Super and Kirit Hira joined as a senior analyst from Platinum Asset Management.

“We are in control of our own destiny, we are taking on all the equity and internalising distribution, we had an engagement change, we had the corporate buyout, Ben retired from the investment industry in late 2024 and Kirit joined as a senior analyst so there’s been a few changes but our performance has been maintained throughout,” Margolis said.

Merlon currently runs an Australian Shares Income and Concentrated Australian Shares fund which are $575 million and $386 million in size respectively. Over five years, the Concentrated Australian Shares fund has returned 10.5 per cent per annum to 31 May and the Australian Shares Income fund has returned 10.6 per cent per annum.

Direct access to clients

The exit of Fidante means the fund manager now has a “direct line” to the clients and advisers, Margolis explained, compared to being one step removed with a fund distributor in place. Focus is given to ‘foundation partners’, those clients that are using both of Merlon’s funds, who have been with the firm for a long time and who have a strong belief and understanding in the investment process.

Dooley added: “We have used the term ‘foundation partners’ and they have direct access to our investment teams. There was a gap in the market for a fund manager with a high service level and allowing clients to have direct access to the portfolio managers. It’s about communication and meeting client needs.”

“It is good to have that point of contact now to educate them, have those ongoing conversations and deepen the relationship. We have been going out to retail advisers, to consultants, and explaining how we’ve evolved, the rebranding and the strength of the team. It’s given Merlon a fresh coat of paint and shows we’re here for the long haul.”

The key differentiators for Merlon, Margolis said, are its staff ownership and alignment, internal distribution practices, investment philosophy and process, track record, client engagement and its advisory board.

Engagement over exclusion

The final point – the advisory board – was an arrangement brought in by Merlon following the Fidante buyout and helps to influence decisions around ESG, primarily on governance matters. Set up in 2024 and led by ESG and sustainability manager Rebecca Grieg, the firm concluded that proactively engaging with companies would be better than screening them out and could enhance investment, business and community outcomes.

This was because Merlon felt divesting from companies such as heavy carbon emitters or gambling – two areas of particular focus for Merlon – could lead to greater private ownership of the assets which would be detrimental to ESG outcomes.

“We decided it’s better to be in the tent and actually engage to get them to improve then divest. It’s better for society and better for the companies themselves,” Margolis said.

A particular change made has been around the 10-15 letters which are sent per year to board directors of its investee companies where Merlon believe governance can be improved. These introduce Merlon, outline its investment thesis in the company, provide an overview of its ESG approach, summarise key ESG identified at the chosen company and seek future constructive engagement.

As well as the letters, it formally engages with board directors on issues such as governance, remuneration, M&A and capital allocations.

Joey Mui, portfolio manager and analyst, said: “It is quite a disciplined process, there’s a lot of transparency, the letters mean there is nowhere to hide as if the letter is public then it holds us accountable.”

“It’s about getting cohesion. We do usually get a reply from a company which is good test of engagement or an invite to meet with the management.”

In these instances, the firm said it will increase its initial investment but if there is a negative one, Merlon may limit further investment or – in the worst-case scenario – it will fully divest if further risks are uncovered or management demonstrates an inadequate awareness of the risks.

As for whether the Merlon funds would be described as ‘ESG funds’, Margolis said this was difficult to define and that its main consideration is the governance component of ESG.

“It’s a different way to approach ESG but some advisers laugh and say ‘no we won’t look at it’ because we hold gaming companies, for example. We think it’s about factoring in the risk and trying to influence companies not just excluding it, it’s about integration.”

“It was ahead of its time when we started but other firms will catch up! For example, AustralianSuper is now investing in Whitehaven and we owned that in 2021.”