Fund name: Dreman Contrarian Large Cap Value (DRLVX)

Objective: the fund seeks total return by investing primarily in common stocks of undervalued large companies with relatively high dividends.

Adviser: Dreman Value Management LLC. Dreman Value Management is one of the pioneers of contrarian-value investing, an investment philosophy based on a disciplined approach of selecting stocks with a low price-to-earnings ratio. The company invests in undervalued companies that exhibit strong fundamentals, above-market dividend yields and historic earnings growth, managing nearly $22 billion in assets for a wide variety of institutional, sub-advisory and high-net-worth clients.

Manager: David Dreman, Clifton Hoover, James Hutchinson. Mr. Dreman is the founder, chairman and chief investment officer of Dreman Value Management. He’s also a Forbes columnist and author of three books, most recently Contrarian Investment Strategies: The New Psychological Breakthrough (Amazon reports a publication date of December 2030 which might be a typo). Mr. Hoover is managing director and co-chief investment officer of Dreman's large cap value strategy. He joined Dreman on December 4, 2006. Previously, he was with NFJ investment group since 1997. He began his career as a financial analyst with NationsBank in 1985. Mr. Hutchinson is executive vice president and managing director with Dreman. He joined Dreman in October 2000. He has had over 30 years experience in Finance and Trust/Investment Management with The Bank of New York prior to joining Dreman in August of 2000. This particular team also runs DWS Dreman Concentrated Value and DWS Dreman High Return Equity. Mr. Dreman also runs a hedge fund (Dreman High Opportunity Hedge Fund L P, since 2005) and a new closed-end fund (Dreman/Claymore Enhanced Opportunity Fund).

Opening date: November 4, 2003.

Minimum investment: $2,500 for both regular and tax-sheltered accounts; minimum subsequent investment is $1000 or $100 if you establish an automatic investing plan.

Expense ratio: 1.30% after waivers on $10 million in assets.

Comments: the case for this fund is remarkably straight-forward: it’s an unadvertised, no-load clone of DWS Dreman High Return Equity (KDHAX). According to company representatives, Dreman launched the fund primarily for in-house use and, secondarily, as insurance against the prospect that they might one day sever their relationship with DWS. Out of respect for DWS and its task of selling a version of the fund with a 5.75% sales load, Dreman avoids marketing – or even discussing – this fund and its siblings. Dreman doesn’t mention the existence of its funds on its website and its news release archive makes no mention of them. As a result, the fund has very few assets ($10 million) and one significant shareholder: David N. Dreman beneficially owns 75.08% of the fund as of the last SAI while Dreman Value Management’s Profit Sharing Plan owns another 9.3%.

So, is there any reason for you to join him? Three reasons that I might consider.

First, Dreman is legendarily successful. The note I made on the teaser to this article (63,600 "guru" references) is some indication of the esteem in which he’s held. In addition to general references to his acumen, you find him featured on the websites that try to replicate famous investor’s processes: ValidIdea’s guru analysis, financial-gurus.com, stockpickr.com and so on. Over the long term, KDHAX has handily outpaced its large-value rivals and the S&P500 with significantly lower beta. And, so far, the no-load fund has tracked KDHAX with great precision.

Second, Dreman is actively working to strengthen the Value Management team. Mr. Dreman is 71 years old and has begun an aggressive overhaul of his investment firm. Mark Bruno, writing for Pension & Investments on-line edition (May 28, 2007) noted that he’s hired a potential heir for the Chief Investment Officer position as well as a new president and new CEO. In a self-conscious attempt to upgrade operations, compliance and marketing, 11 employees have left the 47-person firm since the start of 2006 while 18 have been added. He brought in Cliff Hoover as a potential successor. Mr. Hoover seems to have won Morningstar’s endorsement (he "amassed fine records" at both the large value and small value funds he ran for NFJ) as well as Mr. Dreman’s.

Third, you know what you’re getting. Mr. Dreman is adamant: he doesn’t succumb to "style drift," he holds a relatively small number of stocks (46 at the moment, with 40% of the portfolio in ten names) and trades rarely.

There are two concerns also worth noting:

First, he’s going to do what he’s going to do, whether you like it or not. This is a warning for all of those folks who bailed on Muhlenkamp fund (MUHLX) this year. Great investors do what they want to do, pretty much without regard for what the rest of the investing world is doing. As a result, their relative performance occasionally stinks. Mr. Muhlenkamp’s fund has returns in the top 2% over the past decade and the bottom 2% in the past year. Every three or four years his relative performance stinks. Likewise Mr. Dreman: his fund was in the bottom 1% of its peer group in 1999 and the top 1% in 2000. He trails his peers about one year out of three. Relative performance for KDHAX was mediocre in 2006 and bad so far in 2007, which translates to weak five-year numbers and a three-star Morningstar rating.

Second, he’s leaving. Mr. Dreman has no immediate plans to depart and is, by all accounts, focused, vigorous and in full possession of his faculties. Nonetheless, he’s 71 and setting things up for a successor. In general, such successions have gone very smoothly as long as you bring in bright new guys and take the time to acculturate them to the Great Man’s system. As I’ve noted before, the legendary Max Heine (of the Mutual Series funds) was succeeded by the legendary Michael Price who was succeeded by the legendary David Winters who was succeeded by the not-quite-legendary but d**med competent Anne Gudefin who has steered Mutual Discovery to a five-star rating. The legendary George Mairs was succeeded smoothly by the highly-competent William Frels who may well be setting up his own successor now. Still, there have been funds that bungled the succession and it’s a factor to consider.

Bottom line: if you believe in value investing but don’t believe in paying a lot, you’ve got to take this fund seriously. After waivers, it charges less than 0.20% more than Dreman High Return which is 600-times its size. It comes with a guru, but without a sales load or marketing.

Company website: none, though you can learn about Dreman’s personnel and general process at dreman.com.