So far, the approach has worked, helping the managers achieve
their goal of beating the Russell 1000 Value index, a measure of
undervalued large-company stocks. Although the no-load, low-minimum
version of the fund has been around only since early 2012, an older
share class of the fund, which was established in October 2003 and
has the symbol
, returned an annualized 6.0% over the past five years. That
outpaced the Russell index by an average of 2.1 percentage points
per year. Plus, the fund was a tad less volatile than the index
over that period (returns and related data are through May 3).
Recent performance has also been first-rate. Over the past year,
the no-load share class returned 26.3%, topping the Russell index
by 3.0 percentage points, Standard & Poor's 500-stock index by
7.6 points and the typical large-company value fund by 6.5 points.
Montgomery attributes about half of the fund's recent performance
to the firm's added momentum screen.
Montgomery is a self-described numbers and statistics geek. He
founded Bridgeway Capital Management in 1993 on the principle that
a quantitative approach to stock picking could take the emotion out
of investing. The firm's data-driven approach defines everything
from when to buy and sell a stock to how much of the fund's assets
are invested in a given sector (the target, after copious amounts
of study, is 5% to 7% of assets in each sector). Investing broadly
across sectors helps reduce short-term volatility, says Montgomery.
He and other members of his team pay particular attention to buy or
sell decisions that will shift the weightings of a particular
sector into double-digit percentages.
Montgomery and his cohorts, who are based in Houston, manage
their own group of funds, all under the Bridgeway name. In early
2012, they partnered with American Beacon Advisors, a Fort Worth,
Tex., firm with its own lineup of funds, to distribute Bridgeway
Large Cap Value -- hence the double billing in the fund's name.
Bridgeway is a subadviser of the fund and oversees the day-to-day
At last report, the fund held 122 stocks and had more than
one-fourth of its assets in financial firms. It's heavy, too, in
energy names, such as ExxonMobil and ConocoPhillips, and in
consumer-oriented stocks, such as Procter & Gamble and
supermarket giant Kroger. Top holdings include energy giant
Chevron, credit card company Discover Financial, and AT&T. With
an annual turnover rate of 21%, the average stock remains in the
portfolio for about five years -- nearly five times longer than the
typical holding period of its large-cap value fund peers. The
fund's annual expense ratio is 1.21%.