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Bill Miller and Value Trust

Read: Case Two in our textbook, “Bill Miller and Value Trust” found on pages 23-37.

Before reading! Study the following questions and prepare your answers to them as your reading progresses.

Remember as you were told in class to study all the exhibits attached to the case before reading any of the text. By the time you have finished examining the exhibits, you should have developed insight into the answers to the questions below.

Make a decision! Come to class with your own answer to Question 6 below. You may change your mind later in light of the class discussion or at any time. “A wise man changes his mind. A fool never does.” It is important to know what you think and to be decisive.

1. How well has Value Trust performed in recent years? In making that assessment, what benchmark(s) are you using? How do you measure investment performance? What does good performance mean to you?

2. What might explain the fund’s performance? To what extent do you believe an investment strategy, such as Miller’s, explains performance?

3. How easy will it be to sustain Miller’s historical performance record into the future? What factors support your conclusion?

4. Consider the mutual fund industry. What roles do portfolio managers play? What are the differences between fundamental and technical securities analysis? How well do mutual funds generally perform relative to the overall market?

5. What is capital-market efficiency? What are its implications for investment performance in general? What are the implications for fund managers, if the market exhibits characteristics of strong, semi-strong, or weak efficiency?

6. Suppose that you are an advisor to wealthy individuals in the area of equity investments. In 2005, would you recommend investing in Miller’s Value Trust? What beliefs about the equity markets does your answer reflect?