Masters in Business

The Art of Giving It Away

John Montgomery's Bridgeway Capital Management donates half of its annual earnings to charity.

John Montgomery's firm, Bridgeway Capital Management, where he is chairman and chief investment officer, of course wants to make money. But what it does with those earnings is a little different: It gives half of its annual net income to nonprofit organizations.

Most of the recipients focus on education, community development, disaster relief and homelessness, and include groups such as the Eastern Congo Initiative and the Human Rights Documentation Initiative at the University of Texas Libraries.

Montgomery, whose firm has $8.4 billion under management, is highly critical of the inflated pay scale at the top of corporate America. Because of this, Bridgeway's highest paid employee earns no more than seven times the lowest paid employee -- compared with a several hundredfold difference at some big companies. All of the employees are equity holders in the firm, via an employee-stock ownership plan.

Bridgeway, Montgomery said, is an “evidence based investment” firm, relying on quantitative analysis, factor modeling and other data-driven strategies.    

Montgomery has an unusual background for someone in finance: He worked as a transportation engineer, using computer modeling and statistical methods at Massachusetts Institute of Technology in the late 1970s. He investigated methods to apply modeling to portfolio management and began using these methods in his own investments in 1985.

Some of his favorite books are referenced here.

You can stream/download the full conversation, including the podcast extras, on BloombergiTunesOvercast, and Soundcloud. Our earlier podcasts can all be found on iTunesSoundcloudOvercast and Bloomberg.

Next week's guest is Jean Case, chief executive officer of the Case Foundation  and chairman of National Geographic.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Barry Ritholtz at britholtz3@bloomberg.net

    To contact the editor responsible for this story:
    James Greiff at jgreiff@bloomberg.net

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