( CFIMX) Clipper Fund announced its new skipper Wednesday, making a somewhat surprising choice.

After two months of uncertainty over who would lead the fund, Clipper's independent directors selected a team from Davis Selected Advisers, headed by Christopher Davis, to replace James Gipson and his lineup at Pacific Financial Research. Clipper will continue to be managed by PFR through the end of the year, and Davis will take over effective Jan. 1.

The reorganization comes after Gipson and his co-managers Michael Sandler and Bruce Veaco announced in September that they would leave the fund at the end of the year. At the time, PFR's parent said Clipper would be placed under the care of investment-management firm Barrow Hanley Mewhinney & Straus, which was widely expected to remain the fund's manager. The parent company, London's Old Mutual, planned to fold PFR into Barrow Hanley upon the trio's departure.

``The Fund's independent directors conducted a search to pinpoint the best candidates to replace Jim Gipson and his team,'' said Norman Williamson, independent chairman of Clipper's board, in a press release. "Davis Selected Advisers' investment philosophy and approach fit well with the approach that the Fund has historically employed.''

"BHMS is an outstanding firm," added Williamson. "However, the independent directors concluded that BHMS' approach to value investing is significantly different from PFR's unconventional definition and also features a more diversified portfolio than the PFR approach."

Christopher Davis is set to pour his own money into Clipper. "As a reflection of our commitment to Clipper, and in keeping with our philosophy of investing in the funds we manage, we will invest $50 million of our own money directly into the Clipper Fund alongside the shareholders," Davis said in the release. "We are committed to holding the shares for as long as we are entrusted with the fund's management.''

Under Gipson and Pacific Financial, Clipper became renowned for holding stocks of large U.S. companies that trade at prices significantly below PFR's estimate of their intrinsic values. Gipson and company are also well-known for holding large cash positions when they believe they can't find any stocks that meet their value-based criteria.

Clipper's large cash stake, which is currently over a quarter of the fund, has hurt it in recent years as the markets have moved up moderately. The fund is down 1.34% year to date, trailing the S&P 500 by 6.6%, according to Morningstar. However, it has returned 7% annually over the past five years, more than 6.6 percentage points better than the S&P 500.

Fee Cuts

In addition to picking a new manager, Clipper also indicated that the fund's investment advisory fee will be reduced from the current annual fee of 1% of average daily net assets. Davis Selected Advisers' new fee structure will be based on a sliding scale ranging from 0.65% of the first $500 million of net assets to 0.485% of assets greater than $10 billion.

Furthermore, the company said that for calendar year 2006 it has agreed to voluntarily waive all management fees in excess of 0.50%.

In a note posted on the Morningstar Web site, fund strategist Kunal Kapoor blessed the fund's move, saying he was "pleasantly surprised."

"The Clipper board deserves tremendous credit for breaking from the pack in an all-too-rare act of independence," wrote Kapoor. "It will be interesting to see if its move emboldens other boards, although that might be hoping for too much. Still, it's a step in the right direction."

"We think highly of BHMS, but handing the fund to it would have ensured that the management fees generated by the fund would continue to fall to Old Mutual's bottom line," Kapoor said.

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