Bridgeway: A Charitable Fund

08/08/2003 12:00 am EST


Walter Frank


The latest featured fund from MONEYLETTER is unique. Numerous funds are called socially conscious as a result of its holdings. This fund, however, is unique in that its structure itself - and not necessarily its portfolio - is socially conscious. The fund donates 50% of the profits from its fees to charities. Here's the story from editor Walter Frank.

"Investors in Bridgeway Aggressive Investors 2 (BRAIX) must be thrilled with the fund's year-to-date return of 26%, versus an 11.3% gain in the S&P 500 for the same period. Unique might be an understatement when it comes to the strategy used to select investments for all seven of the Bridgeway funds. Manager John Montgomery notes that the Bridgeway folks do not make forecasts of the overall economy, don't worry about market timing, are not concerned with quarterly numbers, and do not talk to company management (except to verify data). The goal of these policies is to take all the emotion out of the investment process.

"So if there's no emotion, what drives the investment decisions? Machines. Five to be exact. Montgomery has developed five separate proprietary models. Each is different, and the details are not shared. But this much we know: one is value oriented, one looks for price momentum with a valuation consideration; and three are growth-oriented. The models look across the entire range of market capitalization, which results in portfolios that can have both large-cap, blue chips, and micro-cap tech firms. Montgomery is also willing to take big positions in top holdings; the prospectus allows him to invest up to 25% in a single security. The fund can also engage in purchasing futures and options, short sales, and short-term trading. Bridgeway Aggressive Investors 1, the original fund, closed at $275 million in assets. This is a hallmark of the fund family; it closes funds before asset size becomes a disadvantage.

"Bridgeway prides itself on a number of very shareholder-friendly policies. They keep expenses low by doing all their own research, paying nothing for client or shareholder referrals. They also do not accept soft-dollar payments and employees may not own stocks outside the funds to eliminate any conflicts of interest. Moreover, the fund gives away half of its profits from its fee structure to charities every year. This is a fund you can certainly feel good about investing with."

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