Interview with Rich Pzena: Opportunity Amid the Ruins

IT'S BEEN A DREADFUL YEAR FOR NOTED VALUE MANAGER Rich Pzena, whose funds lost money in 2007, while shares of his newly public management company (ticker: PZN) sank to 12 from more than 22. Blame it in part on the manager's fondness for financial stocks, which had an even more dismal year -- and which account for 40% of Pzena Investment Management's assets. Then there's a shareholder lawsuit, charging Pzena failed to disclose outflows from the John Hancock Classic Value Fund (PZFVX), which he also manages, when the firm went public. Pzena says the suit has no merit.

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If the present is trying, the manager's long-term record still stands tall. The firm's assets under management grew tenfold, to nearly $29 billion as of the end of the third quarter, from $3 billion in 2002. The $7 billion John Hancock fund is down 13% this year and has seen outflows of $1.6 billion since Sept. 30, but it sports an average annual return of 11% over five years. Bloodied but unbowed, Pzena explains what went wrong in 2007 and why there's good value now in beaten-up financials and big-caps generally.