While 2006 was a landmark year for exchange traded funds (ETFs), the actively managed mutual fund industry was left flagging. Proof is in an apology from Legg Mason manager Bill Miller, who sent his investors an apology note as a result of Value Trust’s poor performance last year. This was the first year he failed to beat the benchmark, S&P 500 stock index, since 1990, the only person to claim fame to such a streak in modern times, according to Reuters. The $20 billion fund gained only 5.9%, compared to the average 12.4% that mutual funds usually earn, reports Joe Morris of Ignites.com.
Miller’s apology stated the fund stayed too concentrated in a few stocks; failed to make energy investments in 2003, when prices were low and there were a few bad investments, such as Amazon.com and Yahoo. Miller didn’t have to apologize, but he did. What does this say for the overall industry?
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.