A Model Culture Makes This Diamond Shine
Diamond Hill has been stable while competition wobbles.
While some publicly traded fund companies such as Janus (JNS) and AllianceBernstein (AB) have been through multiple changes in recent years, Diamond Hill Investment Group (DHIL) has been just the opposite--stable. The firm leverages the same investment philosophy across its fund lineup, and it has seen few, if any, departures from its investment staff. It also has been slow to launch new funds, only expanding its lineup when the managers believe they can successfully execute their strategy in a certain space. Even then, it's shown a contrarian streak: Back in 2000, it was one of the first companies to launch a long-short offering ( Diamond Hill Long-Short (DIAMX)) when the market was focused on the seduction of technology and new-age Internet companies. Sticking to its philosophy of finding long-term values has been a successful decision for Diamond Hill. Its funds' long-term records rank among their categories' best.
Focusing on performance, even longer term, is always an easy talking point, but there's more to an investor's experience than just returns. That's why we monitor and evaluate fund companies' structures and actions to assess the likelihood of future and sustainable success. We look at all aspects of a fund company's decisions, homing in on changes in priorities, personnel, and product mixes that could indicate trouble--or success--down the road. In that light, Diamond Hill has consistently placed fund shareholder interests first, and we are confident the firm will continue to do so. Below is a state-of-the-union of Diamond Hill's corporate culture, including our rationale for maintaining its corporate-culture grade, part of its funds' overall Stewardship Grades, at an A.
Putting (Fund) Shareholders First
Diamond Hill Investment Group is a publicly traded fund company. That profile increases the risk of conflicts arising between Diamond Hill stockholders and fund shareholders. Stockholders typically want higher asset and fee levels, which generate more revenue, while fundholders want smaller asset bases and lower fee levels to increase the funds' chance of outperformance. To its credit, Diamond Hill has demonstrated a commitment to fund shareholders in a number of ways. For example, the firm previously closed Diamond Hill Small Cap (DHSCX) at a manageable size, and reopened the fund in September 2007 but with a higher minimum investment to keep size under control. That's quite important given that a swelling asset base can wreak havoc on a manager's investing style, threatening performance in the process. More generally, it indicates that the firm is willing to take steps to protect the interests of long-term fund shareholders, even if it means placing fund performance before asset gathering in the pecking order.
Andrew Gogerty does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.