Essay on Bill Miller and Value Trust

2416 WordsMay 25, 200910 Pages
Bill Miller and Value Trust Background Information Bill Miller is one of the most renowned professional fund managers. This can be proven by the outperformance of the Value Trust, which is managed by him, compared to its benchmark index, the Standard & Poor’s 500 Index (S&P 500), for an astonishing 14 years in a row; and this marked the longest streak of success for any manager in the mutual-fund industry. By the middle of 2005, Value Trust is worth $11.2-billion. Bill Miller’s approach to investment management was research-intensive and highly concentrated. For instance, nearly 50 percent of Value Trust’s assets were invested in just 10 large-capitalization companies. While most of Bill Miller’s investments were value stocks,…show more content…
There are drawbacks associated with mutual funds: No Guarantees. The value of mutual fund investment could fall and be worth less than the principle initially invested. The Diversification “Penalty”. Diversification can help to reduce your risk of loss from holding a single security, but it limits your potential for a “home run” if a single security increases dramatically in value. Costs. In some cases, the efficiencies of fund ownership are offset by a combination of sales commissions, redemption fees, and operating expenses. If the fund is purchased in a taxable account, taxes may have to be paid on capital gains. Expenses Because mutual funds are professionally managed investments, there are management fees and operating expenses associated with investing in a fund, which is called expense ratios ranging from 0.2% to 2.0%. These fees and expenses charged by the fund are passed onto shareholders and deducted from the fund’s return. Taxes As a fund shareholder, you can be taxed on distributions of dividends and/or capital gains made by the fund and profits you make when you sell the fund shares. Research Hypothesis 1.There is a possibility that his overall performance may be affected because of Bill Miller’s choice of concentrating heavily in certain sectors such as financials, health, consumer goods, and telecommunications. 2.By examining and analyzing various theoretical explanations, we will be able to determine whether

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