Excerpt from "Investor Declaration: Investment and Wealth Management Strategies for Changing The Way of the Market"
William Miller is the owner of Legg Mason Group. From 1991 to 2005, he beat the S&P 500 every year. Such a long period of excellent performance cannot be just by luck, when investors at that time simply went crazy if they did not invest in this geniusly managed fund.
The truth, however, is that a fund that does not invest in Mr. Miller is a wise choice. Between 2006 and 2008, his performance almost failed his past 15 years. From 1991, when he took charge of the fund, by the end of 2008, the fund's cumulative performance was only slightly beyond the S&P 500, during which time the fund had an annualized return of 8.5% compared to an annualized return of 7.9% for the S&P 500.
And to get such a slightly above-average (market benchmark index) return, you have to start investing in it from 1991, when Mr. Miller first started managing the fund, which had only $750 million in assets. If you started investing in the fund after 1993, you may not get as much as a passive index fund.
However, the fund began to gain prominence in 1998, and since then, its assets have quickly reached $8 billion; any investor who invests in the fund at the end of that year and holds it for more than 10 years will receive a 4% worse return than the annualized return of the S&P 500.
By 2006, the miller managed more than $20 billion in assets, when his fund began to take a sharp turn for the worse, and then performed more than 15 percent worse than the S&P 500 every year