Merlon will manage Challenger's Australian Share Income Fund and related mandates worth $670 million under a boutique structure.
The fund will be renamed the Merlon Australian Share Income Fund.
It will continue to be headed by portfolio manager Neil Margolis, who will also be Merlon Capital's principal.
Margolis will be joined by Challenger colleagues Ben Goodwin and Andrew Fraser.
Additionally, AMP Capital Investors head of Asia-Pacific equities research Hamish Carlisle and ex-Portfolio Partners portfolio manager Nerida Hall will be new additions to Merlon Capital.
Staff will have equity in the boutique.
Challenger would have a stake in Merlon Capital that was "not of a dissimilar" size to its holdings in other boutiques, a Challenger spokesperson said.
The Merlon Australian Share Income Fund aims to generate tax-effective income and capital growth from listed shares over the medium to long term by identifying companies with attractive and growing dividends.
