By Herbert Lash
NEW YORK, April 17 (Reuters) - David Dreman, a noted Wall Street value investor who was fired early this month by DWS Investments as the manager of one its funds, could be finding vindication of sorts in the fund's recent jump.
The DWS Dreman High Return Equity Fund, which Dreman has managed for more than 20 years, has been on a tear ever since DWS, the asset management arm of Deutsche Bank AG , said on April 2 it would replace Dreman.
In the second quarter through Thursday the fund has gained 13.4 percent, almost double the 8.6 percent rise in the total return of the benchmark Standard & Poor's 500 Index.
Dreman, a contrarian investor who buys out-of-favor stocks trading at low price-to-earnings ratios, has written three books on investment psychology that examine how investors, swayed by the sentiment of the market, buy or sell securities at the wrong time and price.
Dreman, like other deep value investors, was slammed last year for taking big positions in Fannie Mae and Freddie Mac. The shares of the two housing finance companies later lost nearly all their value after the government seized the companies, which have been at the center of the financial crisis spawned by the deep housing slump.
'Everybody had their personal devils last year,' Dreman said in an interview on Friday. 'There is nobody that is not going to have a couple of bad years or be down some.'
High Return Equity fell 43.3 percent over the past 52 weeks, ranking it at the bottom 97th percentile of its peers, according to Lipper Inc., a unit of Thomson Reuters.
But the fund has made up ground fast and is now at the top of its peers this quarter, ranking in the fourth percentile.
Since High Return's inception in 1988 it has beaten both the S&P 500 and Russell 1000 Value Index, according to Dreman Value Management LLC, the asset management firm run by Dreman.
Dreman said the new management team slated to take over the fund around June 1 is conservative, and because of its quantitative approach, might not be able to move fast enough when the market turns.
'When the market recovers, I think they're going to trail,' he said.
Dreman said he has positioned his portfolio to be diversified across the S&P 500 spectrum, which he said worked well after the recession in the early 1990s.
The president of Dreman Value Management, Jim Hutchinson, in a letter signed on Thursday, said a DWS product manager, David Wertheim, had 'badly misrepresented' the long-term record of the High Return fund.
The fund 'is not necessarily a recommended strategy for investors with a one-year or three-year investment horizon,' said Dreman's firm.
In a statement, DWS said the High Return fund trailed almost all its peers, according to both Morningstar and Lipper, over the one-, three- and five-year periods as of March 31. It trailed more than half its peers over the 10-year period.
The letter belittles DWS, saying the High Return fund is poised 'for what we believe will be superior performance during the ensuing recovery.'
(Editing by Leslie Adler) Keywords: FUND DREMAN/ (herb.lash@thomsonreuters.com; +1 646 223 6019; Reuters Messaging: herb.lash.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, April 17 (Reuters) - David Dreman, a noted Wall Street value investor who was fired early this month by DWS Investments as the manager of one its funds, could be finding vindication of sorts in the fund's recent jump.
The DWS Dreman High Return Equity Fund, which Dreman has managed for more than 20 years, has been on a tear ever since DWS, the asset management arm of Deutsche Bank AG , said on April 2 it would replace Dreman.
In the second quarter through Thursday the fund has gained 13.4 percent, almost double the 8.6 percent rise in the total return of the benchmark Standard & Poor's 500 Index.
Dreman, a contrarian investor who buys out-of-favor stocks trading at low price-to-earnings ratios, has written three books on investment psychology that examine how investors, swayed by the sentiment of the market, buy or sell securities at the wrong time and price.
Dreman, like other deep value investors, was slammed last year for taking big positions in Fannie Mae and Freddie Mac. The shares of the two housing finance companies later lost nearly all their value after the government seized the companies, which have been at the center of the financial crisis spawned by the deep housing slump.
'Everybody had their personal devils last year,' Dreman said in an interview on Friday. 'There is nobody that is not going to have a couple of bad years or be down some.'
High Return Equity fell 43.3 percent over the past 52 weeks, ranking it at the bottom 97th percentile of its peers, according to Lipper Inc., a unit of Thomson Reuters.
But the fund has made up ground fast and is now at the top of its peers this quarter, ranking in the fourth percentile.
Since High Return's inception in 1988 it has beaten both the S&P 500 and Russell 1000 Value Index, according to Dreman Value Management LLC, the asset management firm run by Dreman.
Dreman said the new management team slated to take over the fund around June 1 is conservative, and because of its quantitative approach, might not be able to move fast enough when the market turns.
'When the market recovers, I think they're going to trail,' he said.
Dreman said he has positioned his portfolio to be diversified across the S&P 500 spectrum, which he said worked well after the recession in the early 1990s.
The president of Dreman Value Management, Jim Hutchinson, in a letter signed on Thursday, said a DWS product manager, David Wertheim, had 'badly misrepresented' the long-term record of the High Return fund.
The fund 'is not necessarily a recommended strategy for investors with a one-year or three-year investment horizon,' said Dreman's firm.
In a statement, DWS said the High Return fund trailed almost all its peers, according to both Morningstar and Lipper, over the one-, three- and five-year periods as of March 31. It trailed more than half its peers over the 10-year period.
The letter belittles DWS, saying the High Return fund is poised 'for what we believe will be superior performance during the ensuing recovery.'
(Editing by Leslie Adler) Keywords: FUND DREMAN/ (herb.lash@thomsonreuters.com; +1 646 223 6019; Reuters Messaging: herb.lash.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.