Despite a recent value comeback, James O'Shaughnessy says he's selling his two remaining value-oriented mutual funds to concentrate on managing private accounts.

Picking up O'Shaughnessy's

(OSCGX)

Cornerstone Growth and

(OSCVX) - Get Report

Cornerstone Value funds is Novato, Calif.-based mutual fund company

Hennessy

.

The firm runs two portfolios that use an investment style similar to the O'Shaughnessy portfolios. Hennessy has less than $30 million in fund assets. The O'Shaughnessy funds have about $220 million in assets.

O'Shaughnessy was once known for his advocacy of the Dogs of the Dow theory, which calls for investors to buy the highest-yielding stocks in the

Dow Jones Industrial Average

each year. But last fall, O'Shaughnessy merged his Dogs of the Market fund into Cornerstone Value, and combined another portfolio, Aggressive Growth, into Cornerstone Growth.

He takes an unusual approach to managing the Cornerstone funds. Each year, he selects 50 stocks that meet the criteria generated by the firm's quantitative computer models, and holds them throughout the year -- no matter how they behave. Because the stock selection relies on computer models, it isn't beholden to any specific capitalization, though in Growth it leans toward small-cap stocks and in Value toward large-cap.

And because stock selection is revisited each year, the whole portfolio can change annually.

The style has produced mixed results. In the growth offering, the fund trailed its small-cap peers in each of the last two years. This year, it's outperforming those other funds, up 8.5% vs. 5.8%. The value fund has underperformed the average large-cap value fund in each of the last three years.

O'Shaughnessy now says he believes there is greater growth potential in managing accounts for individual clients than in running mutual funds. His firm manages about $500 million in private accounts, also known as "separate accounts."

Neil Hennessy, who runs the fund company that bears his name, says that because he's also purchasing the quantitative models O'Shaughnessy used, shareholders shouldn't expect any change in the way the funds are run.

"We believe in the mutual fund business and Jim is more a believer in the separate account business,'' says Hennessy.

See Tuesday's

Fund Openings, Closings, Manager Moves.

See Monday's

Fund Openings, Closings, Manager Moves.