Dreman Value Management looks to dampen volatility by promoting Hoover to sole CIO; seeking 'alpha from more than a few stocks'
Financial advisers and investors should expect less risk and potentially lower returns from Dreman Value Management LLC now that its chairman and chief investment officer, David Dreman, has stepped down, according to fund watchers.
Yesterday, Dreman said that E. Clifton Hoover, who joined the company in 2006 as co-chief investment officer, co-director of research, portfolio manager and managing director, will replace Mr. Dreman as sole CIO of as of Oct. 31.
Mr. Dreman, an iconoclastic contrarian value manager, is renowned for taking risky bets on single stocks that are out of favor. As a result, he has enjoyed good runs, as well as acute hits to his performance, observers said.
Last year, DWS Investments fired Mr. Dreman as the manager of its DWS Dreman High Return Equity Fund Ticker:(KDHAX), which he had run since its inception in 1988. The firm replaced him with a team of its own mangers.
Going forward, Dreman wants to achieve strong consistent returns by taking less risky bets, said Tom Winnick, managing director of marketing distribution.
“While it's great to have those tremendous up years, we think we will still have up years, but we want to gain that alpha from more than a few stocks,” he said. “We want to cut out the volatility that particular names will give you and smooth that out.”
Creating less concentrated portfolios may mean lower returns for investors, but it might also be welcome, given that it will mean less risk, said Greg Carlson, a fund analyst at Morningstar Inc.
“Part of what drove [Mr.] Dreman's success was his ability to ride it out over the long haul,” Mr. Carlson said.
“I don't think [Mr. Hoover] is as value-oriented as [Mr.] Dreman. He is a value investor, but I don't think he is as likely to invest in really troubled situations,” Mr. Carlson said.
Prior to joining Dreman, Mr. Hoover oversaw large- and small-company stocks at NFJ Investment Group LLC.
Mr. Dreman, who founded the firm in 1977, will continue as the company chairman, member of the investment committee and manager of the $77.5 million Dreman High Opportunity Fund Ticker:(DRLVX) and the $7.26 million Dreman Contrarian Market Overreaction Fund Ticker:(DRQLX).
Dreman has $5 billion in assets under management.
