Bill Miller

This case narrates the story of Bill Miller, a fund manager at LeggMason Inc. who was able to consistently outpace both S&P 500 and Russ 1000. Outperforming market indexes for even a single year is a great accomplishment, but Miller was able to sustain the returns of the fund for 14 years in a row.

1. How well has value trust performed in recent years? In making that assessment, what benchmarks are you using? How do you measure investment performance? What does good performance mean to you?

Bill Miller and Value Trust has managed to consistently outperform the S&P 500 in not only the bull markets of late 1990s but also the bear markets of early 2000s. Similarly it has been able to achieve an average annual return of 14.6% which was 3.67% more than the S&P 500’s return. The Morningstar Report has given the Value Trust a five star rating based on historical profile and its beta relative to S&P 500 and Russ 1000 is 1.31 and 1.33, respectively. This suggest that the return and risk of Value Trust is likely to move up or down by approximately 30% against the indexes. Although this signifies a significantly higher return as compared to the market, it also depicts higher risk associated with the fund. Moreover, the fund focuses on a large growth strategy meaning that it primarily invests in companies which are experiencing high growth and have market values greater than that of $10 billion. This may help in explaining the high rates of return it has enjoyed over the years. In addition, the return of the fund was so high that $10,000 dollars invested in the trust would have yielded $330,000 in just 23 years.

This fund can be assessed by computing the net asset value which is calculated by subtracting liabilities from the market value of the funds’ assets, and then dividing by the fund shares outstanding. The annual total return of the fund can also be used to assess the fund by computing the change in net asset value, adding dividends and capital...