Bill Miller drifts from investment industry at sea

Published Thu, Aug 11 20164:32 PM EDT

Breakingviews

Antony Currie

Bill Miller is drifting from an industry at sea. The veteran money manager once captained both a $21 billion fund with stellar returns and a gargantuan yacht named for Sir Thomas More's Utopia. He is leaving Legg Mason after 35 years with a far humbler record. His fate reflects the stormy seas afflicting the investment business. Miller enjoyed most of his success in a period marked by solid economic expansion and deregulation in areas such as banking that sparked stock-market booms. They helped underpin an impressive 15-year streak, until 2006, of beating the S &P 500 Index . That performance is even more notable now. Sustained low interest rates and low growth make it hard on asset managers. Companies struggling to increase the top line instead have been protecting the bottom line with cost cuts and financial engineering. The markets have changed, too. For one thing, there's even more short-termism. The exponential rise in the amount of information available plays a big part. Also a factor are automated and high-frequency trading strategies that tend to ignore longer-term fundamentals and can cause nasty swings in stock and bond prices. More from Breakingviews : Macy's keeps hope alive for miracle on 34thStreet A rise in low-fee index funds and other passive management strategies have lured investors, too. These now account for more than 40 percent of total U.S. equity fund assets, according to Morningstar, more than double the amount a decade ago. More changes are on the horizon: the rise of robo-advisers may well engulf swaths of active portfolio managers. Miller did recapture a bit of glory amid all this upheaval. Though he quit running the Legg Mason Value Trust in 2011, he kept two smaller funds that he will now own outright after buying out his former employer's stake. The Legg Mason Opportunity Fund has generated a 19 percent return over five years, topping both rivals and the S &P 500 Index. Miller's one-, two- and three-year numbers are less pretty. With the $1.8 billion or so he has left under his command, Miller will sail onward in search of higher seas. For both him and investors everywhere, though, the course is much harder to navigate. For more independent commentary and analysisfrom Reuters Breakingviews, visit breakingviews.com

Bill Miller at Delivering Alpha 2015 in New York.

David A. Grogan | CNBC

Miller enjoyed most of his success in a period marked by solid economic expansion and deregulation in areas such as banking that sparked stock-market booms. They helped underpin an impressive 15-year streak, until 2006, of beating the S&P 500 Index.