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Charles Brandes has squeezed a lot out of a chance meeting more than 40 years ago. Emerging from the Benjamin Graham conference room in the headquarters of his San Diego money management firm, Brandes walks to the lobby to show off a letter he received from the father of value investing in 1974, when he opened the business that would become Brandes Investment Partners. The slightly yellowed letter on Graham’s personal stationery is displayed under glass, next to a first edition of Security Analysis, which Graham cowrote with David Dodd in 1934 and has since become the bible for those who buy stocks priced below their real worth.

In his own book on investing, Brandes on Value: The Independent Investor, Brandes chronicles his fortuitous first meeting with Graham and how their subsequent conversations changed his life. Brandes’s adulation doesn’t stop there. He funds a think tank that researches Graham’s theories of investing and other topics, such as countering behavioral biases, and his marketing material includes a biography of Graham and handouts on the role the famous investor played in the founding of Brandes Investment Partners, which focuses exclusively on value and now has $30 billion in assets. A three-minute video on the Brandes Investment Partners’ website, When Charles Met Benjamin Graham, extols “the monumental twist of fate” that brought the two together. The dramatic voice-over showers Brandes with praise for having the courage to reject Wall Street, “free himself from the constraints of short term–ism” and open his own shop in free-thinking California.

Using the Graham and Dodd approach to investing, sticking with the discipline of buying stocks on sale through the many booms and global financial crises of the past four decades, Brandes became the richest man in San Diego County. Even after an expensive divorce settlement, his net worth is an estimated $1.2 billion, qualifying him for the Forbes 400 list of the richest Americans. He tries not to spend too much on stocks, but he is willing to fund a lavish lifestyle. As owner of the most expensive residence in the county, Brandes has room for a lot of toys: Ten Ferraris, worth more than $4 million, according to his 2011 divorce papers, stock his garage.

Academics have repeatedly shown that over the long term the strategy of buying value stocks has delivered better results than investing in so-called glamour stocks. Graham outlined a framework for value investments in the U.S.; Brandes took the strategy global, believing a wider net would yield more potential opportunities. And although value stocks can suffer long periods of underperformance, prompting many investors to drift from the strategy, Brandes has spent his entire career following Graham’s sacred text to the letter. “I have never seen him flinch, waver for one second, about value investing,” says Brent Woods, who joined Brandes Investment Partners in 1995 and took over as CEO in 2012.

Brandes has been richly rewarded by his orthodox approach to deep-value investing: His firm has been profitable every year. Investors, however, haven’t always benefited from his stubbornness. His largest international fund has delivered benchmarklike results for the past ten years, while his global fund has trailed its bogey, mostly because of bad decisions made around the financial crisis. Brandes’s investors only see significant excess returns after 15 or 20 years.

Brandes’s track record illustrates the challenges facing active managers, whose funds have been losing out for years to cheap index products that promise nothing more than to mirror the returns of their benchmarks. Investors are increasingly skeptical of stock pickers, who promise not only to provide excess returns but to protect clients from the full brunt of market downturns. Although investors love managers who stick to their philosophy and resist the crowd, Brandes’s decision to load up on financial stocks in 2008 and 2009 shows that he may have carried his convictions too far.

Brandes, who personally made $16 million a month as recently as 2011, demonstrates why index funds have become so popular: Investors in active funds might profit some of the time, but managers of active funds win all the time. Brandes Investment Partners charges as much as 95 basis points in fees, whether its funds’ values go up or down. Though index funds, which charge as little as 6 basis points, offer no downside protection, institutional investors know exactly what to expect from them, don’t have to research and question their managers’ thinking and don’t have to defend how much they are spending on fees to their boards of trustees.

Firms with mixed track records, like Brandes Investment Partners, show how difficult it is to find managers that will consistently outperform or be able to educate people enough about their process that they will stay with the funds during prolonged periods of underperformance. “It seems like they’re down, they recover, they lose, they come back, and when you put it all together, they basically match the benchmark over most periods of time,” says Michael Rosen, chief investment officer of Angeles Investment Advisors, commenting on Brandes’s main strategies. Santa Monica, California–based Angeles, which advises on $47 billion in assets for institutional investors, still invests with Brandes, but far less than it did in the past. Rosen confirms how hard it is to assess active managers, their records and how they will likely perform in the future. Brandes’s returns may look mediocre, but many firms are in the vast middle of performance at one time or another, and other factors need to be analyzed, he says. “How to separate the truly superior organizations from the okay organizations is not something that can be bottled or written into some algorithm in a neat little formula,” Rosen adds.

Independently owned Brandes Investment Partners has 23 partners, including Brandes, and 337 employees. The amount of money it manages has fluctuated dramatically. At the end of 1995, after more than 20 years in business, the firm had just $6 billion in assets. In the late 1990s, when its flagship global and international equity funds started posting stellar results, the firm took off. Brandes ended 1998 with $25 billion, even though it had begun to close funds to new clients, believing growth would hurt performance. In the 2000s assets continued to climb from market appreciation and new money from existing clients; Brandes had hit $112 billion by the end of 2007. But poor performance during the financial crisis scared off investors. The firm’s assets have declined every year since 2008, falling to a low of $26.4 billion at the end of 2014.

In addition to its flagship funds, Brandes offers 20 value-style investments, including U.S. and global small-cap equity and global and international midcap equity. The firm has investments focused on European equities, Asia-Pacific ex-Japan equities and even fixed income. Ten of these smaller strategies have outperformed their benchmarks by 1 to 4 percentage points annually over three years. Oliver Murray, who joined the firm in 2002 to set up a mutual fund company in Canada and is now head of client services, says that as an independent firm Brandes can remain true to value no matter what: “To do that, you need to be free of outside influences like corporate owners, where asset-gathering targets and profitability targets are front and center.”

Like all investing styles, value goes in and out of favor. By some measures, value stocks have been underperforming for seven years. Joseph Huber, who founded El Segundo, California–based Huber Capital Management in 2007 after overseeing $40 billion in value assets at Hotchkis & Wiley, says investors’ move from active to passive funds has made it more difficult for stock pickers, particularly value investors. He explains that passive strategies are price-momentum strategies: The higher the stock gets, the more the index fund needs to own. It’s a buy-high, sell-low approach. “What happens is that active managers underperform because they are trying to do the opposite — buy low and sell high,” Huber says. “Those stocks are being taken away from them as clients shift money to passive.” In 2014, he points out, the least expensive stocks based on price-to-book, a common value statistic, underperformed the most expensive stocks by a whopping 10 percentage points.

Brandes makes no apologies for his 2008 decisions except to say the firm should think through more possibilities about what could happen to its holdings under certain scenarios. He says the bigger danger for any investor is thinking the markets have permanently changed or doubting the efficacy of the value philosophy and taking on too few risks. “I suppose you could think about imagining black swans more than we had imagined black swans before,” says Brandes, 72, who is chairman of the firm and a member of its investment oversight committee but is no longer involved in the day-to-day stock picking. “I do think we imagine more about black swans. However, you have to be very careful because the chances of that happening are slim. They’re saying in the industry now that there’s a lot more likelihood of something like the credit crisis happening than the bell curve would suggest. But I’m not too convinced.”

He could be right. At the peak of the technology bubble in the late 1990s, many value money managers famously threw in the towel. A few years later the markets shifted, value stocks went on a tear, and growth stocks fell out of favor.

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