Bridgeway

FREQUENTLY ASKED QUESTIONS

Frequently Asked Questions

Curious about Bridgeway and its strategies? Here are a few of the questions we hear most often. If you have a question that isn’t answered here, please contact us.

Answers

What makes Bridgeway different from other investment managers?

Bridgeway is driven by two fundamental beliefs that separate it from other asset managers and most of Wall Street. First and foremost, we care. We care about putting investors first. We care about performance, integrity, and the world at large. Second, we believe a great philosophy is only valuable when it is executed faithfully and applied to the real world – the only place it can generate real results.

Our collective desire to serve others originates from our core values of integrity, performance, cost efficiency, and service. These are the factors that drive us every day to produce the investment results expected by our clients. We believe our strong and principled organizational culture coupled with our disciplined investment process allows us to provide innovative investment building blocks to institutions and advisors.

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What is Bridgeway’s investment philosophy and process?

Our investment process is straightforward and statistically driven. It reflects our fundamental philosophy of putting the investor first and it is driven by our passion for logic, data, and evidence. Our process seeks to avoid behavioral biases by focusing on objective data gathered from multiple sources over decades and through many market cycles. It is based on sound academic theory and includes a rigorous testing process. At all times we seek to continue improving our process through our investment in ongoing research.

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Why does Bridgeway have two families of investment strategies?

We have two families of investment strategies, Select and Omni, designed to meet different investor needs and philosophies. While they are different, both styles incorporate our statistically driven, evidence-based process.

  • Select Strategies are designed to generate alpha. Our Select strategies seek to capitalize on how markets work and capture risk premiums through statistical stock selection and multi-factor diversification.
  • Omni Strategies are designed to capture risk premiums by utilizing broad diversification in specific asset classes.

There are advantages and disadvantages to each of these investment styles, so investors and advisors must decide which style or combination of styles will satisfy their investment needs.

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Why aren’t the Omni Small-Cap Value and Omni Tax-Managed Small-Cap Value funds available to the general public?

The Omni Small-Cap Value and Omni Tax-Managed Small-Cap Value funds are available only through the BAM Alliance, a community of more than 130 independent wealth management firms located throughout the United States. The BAM Alliance is an exceptional partnership for Bridgeway because of the shared philosophy of evidence-based investing and our mutual goal of eliminating “the behavior gap” – the behavior that leads to lower investor returns versus investment returns. These two funds were developed in conjunction with the BAM Alliance based on this shared philosophy and specifically for the clients of firms that are part of the BAM Alliance.

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How do you keep transaction costs and expenses low?

Our experienced investment professionals are continuously exploring processes that can minimize trade execution costs to enhance returns under all market conditions. Our small but talented and dedicated team helps keep Bridgeway’s cost structure low. In addition, we avoid all “soft dollar” arrangements (payment of commission dollars generated by stock transactions in return for services) entirely.

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What have you done to prevent the underperformance experienced in 2008, 2009, and 2011?

Like many investment management firms, we experienced some underperformance from 2008 to 2011, but underperformance was not broad- based across all of our strategies. What we found is that during this period some of our strategies did well (specifically, our value and Omni strategies are much less susceptible to the risks of macro-driven markets), but some of our more growth-leaning Select strategies underperformed their primary market benchmarks in ways we can tie back to the markets' reaction to being very driven by macro-economic events (e.g., 2008 U.S. mortgage debt crisis). After significant analysis of our performance in these time periods, we have not changed our investment philosophy or process. Rather, we have incorporated the last four years (2008 to 2011) of historical data and evidence into our process and expect to navigate these markets better in the future.

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What is John Montgomery’s (Chief Investment Officer) personal investment philosophy?

John has a high pain threshold in market downturns and does not constantly look at personal account statements. This keeps him from obsessing about returns and alleviates undue stress. His personal investment philosophy is a simple four-step plan:

  • Structure an asset allocation plan that matches your goals, investing time horizon, and tolerance for risk (getting help from a qualified financial advisor, as appropriate)
  • Write the plan down
  • Implement the plan
  • Rebalance to the plan approximately annually (or as lifestyle changes occur)

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How does John Montgomery personally invest his own money?

We have a strong commitment to disclosure at Bridgeway, and think it is fair for our shareholders and investors to know exactly how John, as the head of their investment management team, personally invests. Bear in mind, everyone’s situation is different in terms of goals, risk tolerance, investing experience, and time horizons. We are not recommending that you follow John’s target allocation as your situation is undoubtedly different than John’s.

John uses Bridgeway-managed portfolios for 100 percent of his stock market investing needs. The table below does not include John’s substantial, majority ownership in Bridgeway Capital Management. (The substantial allocation of Bridgeway Funds through John’s Bridgeway Capital Management ownership can be found in the Statement of Additional Information.)

 

The following table depicts John’s personal targeted fund allocation, but does not show or explain how the Bridgeway portfolio managers (including John) manage money within each fund.

Fund
Allocation
Bridgeway Aggressive Investors 1 Fund
50.0%
Bridgeway Ultra-Small Company Fund
38.4%
Bridgeway Managed Volatility Fund
8.0%
Bridgeway Blue Chip 35 Index Fund
0.4%
American Beacon Bridgeway Large Cap Growth Fund
0.4%
American Beacon Bridgeway Large Cap Value Fund
0.4%
Bridgeway Small-Cap Growth Fund
0.4%
Bridgeway Small-Cap Value Fund
0.4%
Bridgeway Small-Cap Momentum Fund
0.4%
Bridgeway Omni Small-Cap Value
0.4%
Bridgeway Omni Tax-Managed Small-Cap Value
0.4%
Bridgeway Ultra-Small Company Market Fund
0.4%
Total
100%

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