Backed by Pengana Capital, Antonio Meroni brought the Asia-focused hedge fund he ran under the banner of Rubicon Asset Management – which fell with its owner Allco Finance Group in early 2008 – back to market, while hiring Singapore-based staff for manufacturing and distribution. At Rubicon, Meroni and former co-portfolio manager Tony Wolfe oversaw the event-driven fund as it grew from $23 million at the end of 2006 to $174 million in February 2008. But in the early stages of the financial crisis, Allco collapsed, leaving them without commercial support to run the strategy.

They did not have to wait long before receiving seed capital from another backer. Pengana Capital stepped in with a few million, enabling the investors to “copy and paste” the strategy into the new funds manager’s product range in May 2008, Meroni said, enabling them to keep running the strategy with only a two-month gap in its track record. Like most hedge fund managers in the last two years, Meroni and Wolfe struggled to raise money, resulting in the latter’s exit over his dissatisfaction with their volume of funds under management, which currently stands at $15.1 million. Meroni took advantage of Pengana’s geographical reach to hire fund managers Vikas Kumra, in September 2008, and Robin Yeoh one year later, into the company’s Singapore office. “It’s closer to the [Asian] markets.

They have access to research, and can easily go and see companies – Hong Kong is only a two- or three-hour trip from Singapore,” Meroni said. They are also better positioned to “capture a lot of hedge fund traffic,” since “only about 4 to 5 per cent of investors make the extra trip down under,” he said. The fund’s performance held up well as the financial crisis savaged markets. It delivered slightly positive or negative monthly returns from the crash of August 2008 until March 2009, when equity markets began to rally, because of the fund’s short positions. In some periods, such as early 2009, Meroni held “net short” positions across the portfolio, and most of these were hurriedly cancelled when markets turned up, he said.

But in most environments Meroni implements a nondirectional strategy. His positions, which mainly surround merger and acquisition (M&A) deals and corporate earnings announcements, are based on analysis viewed in the context of how companies have behaved during such events in the past. The team keeps track of failed M&A and the reasons why they broke down, “to have a thorough understanding of what caused them to fail,” Meroni said. Australian M&A has become the “backbone” of the fund’s strategy. About 45 per cent of M&As in which Meroni has invested took place in the domestic market, because they were generally more competitive than those in Asian markets – such as Japan, where initial offer prices usually become final prices –providing better arbitrage opportunities.

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