John C. Bogle Jr., managing director of Numeric Investors L.P., Cambridge, Mass., is proving to be a chip off the old block, in this case a semiconducter chip.
His computer-based investment strategy has catapulted the 3-year-old Quantitative Numeric Fund to the highest ranks of Morningstar Inc., the mutual fund research firm, which just awarded it five stars for risk-adjusted performance.
His hybrid approach is quite different from the Graham and Dodd value strategy embraced by his famous father, John Bogle, the Vanguard Group portfolio manager. But it's highly effective.
The Quantitative Numeric fund, part of the Quantitative Group of Funds in Lincoln, Mass., earned a compound 31.83% in the three years and 36.08% in the one year ended Sept. 30.
The $120 million small-capitalization fund was closed to new investors March 31, when it had $100 million in assets.
A successor midcap fund launched March 21, Quantitative Numeric II, has only $2.5 million. Its expense ratio is capped at 2%.
For both funds, Mr. Bogle applies two stock selection models to rank 1,900 stocks, seeking the top holdings for each market cap in terms of earnings potential and fair prices.
"We're emphasizing lower p/e stocks more than in the past," Mr. Bogle said. "They (the funds) have more of a defensive exposure than they've had in the past."
Holdings change often as turnover on the funds is more than 200% a year.