Bill Miller (finance)
Encyclopedia
Bill Miller is Chairman and Chief Investment Officer
of Legg Mason Capital Management, a subsidiary of Legg Mason, Inc.
He is currently the portfolio manager
of the Legg Mason Capital Management Value Trust and the Legg Mason Capital Management Opportunity Trust mutual fund
s. Miller is also Chairman Emeritus of the Santa Fe Institute
.
in 1972 with a degree in economics
. Subsequent to graduation, he served as a military intelligence
officer overseas and pursued graduate studies in philosophy in the Ph.D. program at The Johns Hopkins University.
Prior to joining Legg Mason in 1981, he served as treasurer
of the J.E. Baker Company, a major manufacturer of products for the steel
and cement
industries. Miller received his CFA
designation in 1986.
Miller was the director of research of Legg Mason from October 1981 through June 1985. Miller co-managed (with Ernie Kiehne) the Legg Mason Capital Management Value Trust from its inception in 1982. Over the years, Mr. Miller and his team have received numerous accolades for their management record and distinct style, which focuses on a detailed understanding of businesses and their intrinsic value. Miller was ranked among the top 30 most influential people in investing when he was named a member of the "Power 30" by SmartMoney. He was also named by Money magazine as "The Greatest Money Manager of the 1990's" and named Morningstar's 1998 "Domestic Equity Manager of the Year." In 1999, he was selected as the "Fund Manager of the Decade" by Morningstar.com. Also in 1999, Barron’s named him to its All-Century Investment Team and BusinessWeek called him one of the “Heroes of Value Investing.”
index for 15 consecutive years from 1991 through 2005 (consistently producing market beating returns is considered to be very unlikely according to the efficient market hypothesis
).
Miller once said, "As for the so-called streak, that's an accident of the calendar. If the year ended on different months it wouldn't be there and at some point the mathematics will hit us. We've been lucky. Well, maybe it's not 100% luck—maybe 95% luck."
Michael Mauboussin
looked at the historical data on the percent of equity mutual funds that beat the market during Value Trust’s 15 year streak. Because the number of equity mutual funds beating the market fell as low as 8% in one year and 13% in another, he estimated the probability of beating the market in the 15 years ending 2005 was 1 in 2.3 million. In evaluating Miller’s streak, Mauboussin writes “Was Miller lucky along the way? Without a doubt. But as Stephen Jay Gould
says, long streaks are extraordinary luck imposed on great skill.”
For the calendar years ending 2006, 2007 and 2008, LMVTX underperformed the S&P 500 Index, but turned the corner and outperformed the S&P by more than 1,400 basis points (14%) for calendar year 2009, as the market rebounded. In 2010, though, the Value Trust underperformed the S&P 500.
in The Journal of Finance), December, pages 2551-2595
Chief investment officer
The chief investment officer is a job title for the board level head of investments within an organization. The CIO's purpose is to understand, manage, and monitor their organization's portfolio of assets, devise strategies for growth, act as the liaison with investors, and recognize and avoid...
of Legg Mason Capital Management, a subsidiary of Legg Mason, Inc.
Legg Mason
Legg Mason, Inc. is an American-based global investment management firm with a focus on asset management. The company’s business is divided in two divisions: Americas and International...
He is currently the portfolio manager
Portfolio manager
A portfolio manager is either a person who makes investment decisions using money other people have placed under his or her control or a person who manages a financial institution's asset and liability portfolios....
of the Legg Mason Capital Management Value Trust and the Legg Mason Capital Management Opportunity Trust mutual fund
Mutual fund
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.- Overview :...
s. Miller is also Chairman Emeritus of the Santa Fe Institute
Santa Fe Institute
The Santa Fe Institute is an independent, nonprofit theoretical research institute located in Santa Fe and dedicated to the multidisciplinary study of the fundamental principles of complex adaptive systems, including physical, computational, biological, and social systems.The Institute houses a...
.
Biography
Miller graduated with honors from Washington and Lee UniversityWashington and Lee University
Washington and Lee University is a private liberal arts college in Lexington, Virginia, United States.The classical school from which Washington and Lee descended was established in 1749 as Augusta Academy, about north of its present location. In 1776 it was renamed Liberty Hall in a burst of...
in 1972 with a degree in economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
. Subsequent to graduation, he served as a military intelligence
Military intelligence
Military intelligence is a military discipline that exploits a number of information collection and analysis approaches to provide guidance and direction to commanders in support of their decisions....
officer overseas and pursued graduate studies in philosophy in the Ph.D. program at The Johns Hopkins University.
Prior to joining Legg Mason in 1981, he served as treasurer
Treasurer
A treasurer is the person responsible for running the treasury of an organization. The adjective for a treasurer is normally "tresorial". The adjective "treasurial" normally means pertaining to a treasury, rather than the treasurer.-Government:...
of the J.E. Baker Company, a major manufacturer of products for the steel
Steel
Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight, depending on the grade. Carbon is the most common alloying material for iron, but various other alloying elements are used, such as manganese, chromium, vanadium, and tungsten...
and cement
Cement
In the most general sense of the word, a cement is a binder, a substance that sets and hardens independently, and can bind other materials together. The word "cement" traces to the Romans, who used the term opus caementicium to describe masonry resembling modern concrete that was made from crushed...
industries. Miller received his CFA
Chartered Financial Analyst
The Chartered Financial Analyst Program is a graduate level self-study program offered by the CFA Institute to investment and financial professionals...
designation in 1986.
Miller was the director of research of Legg Mason from October 1981 through June 1985. Miller co-managed (with Ernie Kiehne) the Legg Mason Capital Management Value Trust from its inception in 1982. Over the years, Mr. Miller and his team have received numerous accolades for their management record and distinct style, which focuses on a detailed understanding of businesses and their intrinsic value. Miller was ranked among the top 30 most influential people in investing when he was named a member of the "Power 30" by SmartMoney. He was also named by Money magazine as "The Greatest Money Manager of the 1990's" and named Morningstar's 1998 "Domestic Equity Manager of the Year." In 1999, he was selected as the "Fund Manager of the Decade" by Morningstar.com. Also in 1999, Barron’s named him to its All-Century Investment Team and BusinessWeek called him one of the “Heroes of Value Investing.”
Value Trust
The Legg Mason Capital Management Value Trust's after-fee return beat the S&P 500S&P 500
The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. The stocks included in the S&P 500 are those of large publicly held companies that trade on either of the two largest American stock...
index for 15 consecutive years from 1991 through 2005 (consistently producing market beating returns is considered to be very unlikely according to the efficient market hypothesis
Efficient market hypothesis
In finance, the efficient-market hypothesis asserts that financial markets are "informationally efficient". That is, one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made.There are...
).
Miller once said, "As for the so-called streak, that's an accident of the calendar. If the year ended on different months it wouldn't be there and at some point the mathematics will hit us. We've been lucky. Well, maybe it's not 100% luck—maybe 95% luck."
Michael Mauboussin
Michael Mauboussin
Michael J. Mauboussin, Chief Investment Strategist at Legg-Mason Capital Management Inc and Adjunct Professor of Finance at the Columbia Business School, is regarded as one of the world’s experts in behavioural finance, and is widely read as an author and as an analyst.Prior to joining Legg-Mason...
looked at the historical data on the percent of equity mutual funds that beat the market during Value Trust’s 15 year streak. Because the number of equity mutual funds beating the market fell as low as 8% in one year and 13% in another, he estimated the probability of beating the market in the 15 years ending 2005 was 1 in 2.3 million. In evaluating Miller’s streak, Mauboussin writes “Was Miller lucky along the way? Without a doubt. But as Stephen Jay Gould
Stephen Jay Gould
Stephen Jay Gould was an American paleontologist, evolutionary biologist, and historian of science. He was also one of the most influential and widely read writers of popular science of his generation....
says, long streaks are extraordinary luck imposed on great skill.”
For the calendar years ending 2006, 2007 and 2008, LMVTX underperformed the S&P 500 Index, but turned the corner and outperformed the S&P by more than 1,400 basis points (14%) for calendar year 2009, as the market rebounded. In 2010, though, the Value Trust underperformed the S&P 500.
Quotes
- “One hundred percent of a company's information reflects its past while 100 percent of its value reflects its future.”The biggest opportunity for investors is really thinking out longer term. . . .” (WSJ, January 6, 2005)
- Certainty belongs to mathematics, not to markets, and anyone who awaits clarity, visibility, or the diminution of uncertainty pays a high price for a chimera.” (Value Trust 12/31/02 Shareholder Report)
- "Stocks, markets, and money managers' performance are subject to enantiodromia, the tendency of things to swing to their opposites. Those swings can have wide arcs, and unsustainable trends can sometimes persist beyond the ability of one to endure. That is why most investors are out of stocks at the bottom--they are tired of losing money--and fully invested at the top--they believe their good performance will persist despite their stocks or the market's being overpriced." (December 1990)
- “It is the nature of financial markets to be subject to sharp price fluctuations, to be buffeted by events, and often to be emotionally trying. Successful investing involves the disciplined and patient execution of a long-term strategy, especially when it is emotionally difficult. That is usually the time the opportunities are the greatest.” (October 1990)
- “We are value investors because we are persuaded of the logic of buying shares of businesses when others want to sell them, and we understand that lower prices today mean higher future rates of return, and high prices today mean lower future rates of return.” (July 2008)
- "Lowest average cost wins."
- "How do I know when I'm wrong? When I can no longer get a quote."
External references
- Legg Mason Capital Management
- CNNMoney - Will the market kill Bill?
- CNNMoney - Bear Stearns investors: Who lost big
- Best Fund Managers 2006 - Bill Miller, BusinessWeek.com.
- Lowe, Janet. 2002. The Man Who Beats the S&P: Investing with Bill Miller. Wiley. ISBN 0-471-05490-9.
- Kosowski, Robert, Allan Timmermann, Russ Wermers, and Hal White, 2006, “Can Mutual Fund ‘Stars’ Really Pick Stocks? New Evidence from a Bootstrap Analysis,” Journal of Finance (Lead Article; Finalist, Smith Breeden Prize for the Outstanding Paper of December 2006 to October 2007 Published
in The Journal of Finance), December, pages 2551-2595
- Barras, Laurent, Oliver Scaillet, and Russ Wermers. “False Discoveries in Mutual Fund Performance: Measuring Luck in Estimated Alphas.” The Journal of Finance, Vol. LxV, No. 1, February 2010.
- Petajisto, Antti. “Active Share and Mutual Fund Performance.” September 30, 2010.
- Mauboussin, Andrew and Samuel Arbesman. “Differentiating Skill and Luck in Financial Markets with Streaks.” November 29, 2010.
- Bill Miller Dishes On His Streak and His Strategy