I'll take Windsor II. You take IWD. We'll go 7 years. You in?

I'll take the bet.

You gonna bookmark the conversation and remember in 7 years?


Andy

Originally posted in thread: 51574

You are on. You should be aware that I won both fantasy basketball and footnbll this year, and I am in first place in baseball.

You have 136.761 shares of IWD.

I have 309.958 shares of Windsor II.

I'll see you in 2013.

Petrocelli

Originally posted in thread: 51574

As of today, Bill Miller's Value Trust fund is exactly even with the S&P500 over the past 5 years. And over the past three years, he has underperformed the S&P500 by an average of 2.20% per year.

He is underperforming this year by 8.43%.

So much damage in so little time. A huge amount of outperformance wiped out quickly.

What an unfortunate example of how past performance is not useful in predicting future performance.


Andy

Originally posted in thread: 51574

My 401k guys selected the following funds based on their 10 year history. Pls don't underestimate them, they come from deep financial backgrounds.

Based on the belief that managed funds do better for internationals, small-cap and growth categories - they came up with the following in early 2000s, all Lipper Rank #1 for last 10years in their categories(No Kidding).

NIIVX (ING International Value Class I, check NIVAX for 10yr performance)
RYLPX (Royce low priced stock fund, US SC Blend)
MIMFX (Fremont micro cap fund Instl, check MMCFX for 10yr performance)
ARTMX (Arisan mid cap Inv)

Needless to say, hardly anyone in these forums heard about these funds. They have performed badly or in a mediocre way for last 3 years.

Having wasted my money on some of these after joining the company in 2004, I won't be surprised if LMVTX, DODFX, FAIRX and other hot favorites go similar route.

Originally posted in thread: 51574

Earlier in this thread, there are some comments about VEIPX versus IWD and Russell 1000 Value Index, suggesting that VEIPX is not worth owning.

Look, however, at the bear market period from mid-200 until end of 2002. (I use mid 2000 only because that's when IWD was born). VEIPX looks like it held up better.

Also, versus the LV Category, VEIPX has better 1-, 3- and 5-year returns (41/46/37) than IWD (50/50/50).

All in all, I don't think one can complain about owning VEIPX. I own it because: (1) it is dirt cheap at 0.31%, (2) it throws off nearly 3% yield, (3) I only own actively managed funds.

IWD rebalances only once a year. I would prefer to have a hand on the tiller not only in up markets but also down markets.

Sure, if you look back the past five years, IWD has been up a tiny fraction over VEIPX, but if we could rely on past performance, we would all put 100% of our holdings into Hennessy Focus 30!!

All in all, I think VEIPX is a good holding for someone who wants a high-yielding LV fund in a tax deferred account. My only complaint is that it holds too many stocks; I prefer funds with 20-30 holdings. That's more than enough for a manager with a good strategy, ideas and ability...and more is probably just watering down his best ideas.

Originally posted in thread: 51574

Look, however, at the bear market period from mid-200 until end of 2002. (I use mid 2000 only because that's when IWD was born). VEIPX looks like it held up better.

Sure, but it didn't hold up better during the next few years. If you have the ability to predict market downturns, and the ability to predict which funds will do better in downturns, then have at it. But for long-term investors, IWD has done better.

All in all, I don't think one can complain about owning VEIPX. I own it because: (1) it is dirt cheap at 0.31%, (2) it throws off nearly 3% yield, (3) I only own actively managed funds.

If you only own actively managed funds, then why are we debating this? Just accept that you will likely underperform passive alternatives over the long term and be content that low-cost active will reduce that underperformance.

All in all, I think VEIPX is a good holding for someone who wants a high-yielding LV fund in a tax deferred account.

I don't understand the attraction of a high-yield fund in a tax-deferred account. You are getting dividends in such an account, which would normally be taxed at 15%. Then you make a distribution from the tax deferred account and pay 25% tax on the dividend. I don't see that higher dividend yield has accomplished anything. Taking a distribution from principal accomplishes the same thing and gives you the same tax rate. A "low yield" LV fund accomplishes the same thing (if such a fund exists....).

Best wishes.

Andy

Originally posted in thread: 51574

Thanks for the personal example of how outperformance in one period is of no use for the future. It is my firm belief that investors need to see real life examples of how performance chasing turns out in order to see through the constant barrage of media hype.

Having wasted my money on some of these after joining the company in 2004, I won't be surprised if LMVTX, DODFX, FAIRX and other hot favorites go similar route.

As I showed in conversation #51561, the odds are against you even with legendary managers. LMVTX has already gone a "similar route", just that the underperformance all happened at once. More often, the fund slowly fizzles such that it fades away gradually. The spectacular flame-out examples aren't as common. And of course, there will always be one or two exceptions that continue to outperform (and we spend all our time talking about them after the fact).

Best wishes.

Andy

Originally posted in thread: 51574

Just an update on our friend Bill Miller. His performance this year continues to amaze, dropping like a bird without wings. He is down 9.33% so far this year.

He has now erased the entire benefit of owning LMVTX over the past five years. He has now underperformed the S&P500 by 0.35% annually over five years.

Riddle: What fund has beaten the S&P500 in each of the past five calendar years, but not over the cumulative 5-year period?

All the outperformance since 2001...gone, gone, gone. (And it happened so quickly).


Andy

Originally posted in thread: 51574

why are you so obsessed with the tracking error of a fund you don't even own?

I agree that the "every calendar year streak" aspect of this fund is less appealing than it seems. What Miller does is deviate substantially from the index with a relatively concentrated portfolio to try to beat the index over the long term. After he realized he had a streak going, there were certain years when he did some short-term shenanigans that most buy-and-holders would normall not engage in to keep the streak alive, but he's mostly long-term oriented. Investors in the fund should try to get their money's worth by having their brokers reassure them about short-term underperformance, tracking error, etc.

C

Originally posted in thread: 51574

is concentrated enough that he could still beat the S&p 500 index by year's end. who knows!

Originally posted in thread: 51574

not to mention the higher ER hurdle and manager risk. Miller is finished and will join the other managers who outperformed for a brief period then returned to obscurity or retired from the business. Too bad fund shareholders cannot retire as comfortably.

Adrian
anenu@tampabay.rr.com

Originally posted in thread: 51574