Q: Can you share with us few stock picks that have not worked out for you?

A: We are value managers, so we may be early in the investment cycle. When we are looking to invest in companies, sometimes all the bad news may be out and sometimes it may not be. Nokia is an example. The stock had been trending downward since March and its dividend yield rose above our 2% hurdle. We did our research and felt comfortable with the valuation and profitability forecasts and bought the stock around $14. In mid-July the company announced lower sales and reduced estimates. The stock subsequently dropped to the $11 range. We re-ran our research and continue to believe that as the world's largest handset maker, Nokia still has the catalyst for appreciation we initially identified. However, if more bad news surfaces our sell discipline will force us to get out of the position.

Keep in mind that as value investors, we often are buying stocks when conditions appear to be rather bleak. A case in point is large pharmaceutical companies. Currently, we own a number of these stocks and they have not been beneficial to the portfolio. While they are trading on an inexpensive valuation basis, and these companies should benefit from the demographics of an aging population, there is lot of political noise because of the election cycle. These companies are generating a lot of cash and are paying strong dividends. The stocks have not performed to our expectations, but patience is something you learn as a value investor.

Q: What sectors generally fall in your universe?

A: We look at the companies first, and sector weighting generally come as result of where we find good companies offering attractive values. In general, companies in the technology and biotech sectors do not pay dividends, so we rarely invest in them. Restaurants are a similar case. Industrials, cyclical and financials are generally where we find the investment opportunities.

Q: How do you measure and control investment risk? Do you benchmark your fund to an index?

A: The BARRA Large Cap Value Index is the fund's benchmark. We are benchmark aware, but we are stock pickers. We find the names and then decide the allocation based on our views of the market and the stocks. We look at total active risk of our portfolio relative to the benchmark - sector weighting is one component to that. Too high active risk, you look like you are not style pure and too low active risk makes you look like you are closet indexer. So we monitor our total active risk and make sure that it is in line with our expectation.

The nature of our stock screening keeps us at a very style pure level. One of the reasons investors are attracted to us is because we stay style pure in our investment discipline. They understand that in a typical market we will do what we tell them we plan to do.