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Legg Mason Value Fund

 
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peteyperson
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Joined: 26 Nov 2002
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PostPosted: Sat Sep 27, 2003 11:26 pm    Post subject: Legg Mason Value Fund Reply with quote

Does anyone have any knowledge of this fund? Any opinions?

We now have a UK equivalent that mirrors this US fund.

I know most of you don't do much more than index the markets but if you were going to invest actively, would this pass muster?

http://www.leggmason.com/funds/ourfunds/factsheets/value_trust.asp


P.S. Bill Miller who runs the fund pens the occasional abstract piece that I find as interesting as any Warren Buffett letter. His latest about the size of animals and their limitations are here: http://www.leggmason.com/funds/ourfunds/whats_new/millercomm.asp Laughing


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Bookm
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Joined: 27 Nov 2002
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Location: Norfolk, VA

PostPosted: Sun Sep 28, 2003 3:38 am    Post subject: Reply with quote

Greetings Pete. I'm curious about having a UK equivalent of a particular fund. How does that work? Is is actually a Legg Mason fund you'd invest in?

Bill Miller has become famous as the only fund manager to have better returns than the S&P 500 index for (IIRC) 10 years in a row. And he's working on yet another year of outperformance in 2003. Which is quite amazing, considering all the factors working against him. LMVTX sports a hefty ER (1.72%) according to M*, with 11.4 Billion in assets. How a value fund outperformed the S&P500 index in the go-go-growth years of the 90's is a mystery. Being on such a winning streak would make anyone wonder when (not if) his luck will run out, when will his performance revert to the mean. Also, how much longer will he stay with this fund? Not to mention his new-found affection for tech/internet-related stocks like Amazon and Nextel, the fund's two largest holdings, and totaling nearly 15% of net assets.

If I would have held this fund for the past 10 years, I'd have a big smile. Debating on holding it for the next 10 years, I'm not so confident. Maybe there's room for LMVTX in a well-diversified portfolio looking for an investment with a value tilt. After all, it would only be one piece among several pieces. I would just be well beyond my own confort zone having a fund's fees hovering around 10% of it's 10 year annualized returns. (1.72%/16.67%) Again, that's just me. Rolling Eyes

Bookm



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peteyperson
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Joined: 26 Nov 2002
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PostPosted: Sun Sep 28, 2003 4:25 am    Post subject: Reply with quote

Hey Bookm,

Interesting reply.

Firstly, I'm debating the merits of active investing vs indexing where possible. Some markets like EM you cannot index here, Pacific you can but the performance has been so poor and active has managed to get a 7% return in place of nothing that it is tempting. With the UK & US especially, there are several special situation funds and small cap funds that look interesting. The downside like you say is a 5% sales load and around 1.75% annual fees. I've worked out the difference in cost from a mostly index to 1/3 index, 1/3 active small cap, 1/3 active best fund I can find and the difference is 0.65%. If you figure that these funds will outperform by that much (they have outperformed considerably beyond that) then it is a reasonable bet. I could always revert to mostly all indexing later with some damage and early taxes.

I've been familar with Bill Miller for a while. Interesting character. I like what he writes which is along the lines of Munger and Buffett, talking about matters other than investing and how many different subjects link together. It helped that he studied philosophy. It is a curious situation. There is a fairly newly created fund in Dublin that invests pretty much directly in the US version and is available here. It requires a $10k inital investment. Being in Dublin it may be considered offshore and have tax benefits I am unaware of. This year though they have gone through the steps of setting up a more regular UK investment structure (I understand they bought out another company) and have launched a UK fund that is a little different due to UK regulations but indeed holds the exact same stocks and is managed by Bill Miller with a $4,500 minimum. The Irish one already has $350m in it and it has only been available here for a couple of years. I can only imagine if possible they will merge them though due to the regulations that may not be possible. Definetely a confusing situation. The new funds is simply called ' US Equity ' with no reference to Value, S&P started with an AA rather than AAA because it is new but says it is basically the same thing as the US version. Also they took over a different UK Legg Mason fund and changed it to the US Equity one, changing the name & strategy. They've gone thru several company name changes through this process, calling themselves Legg Mason Investors and now Legg Mason Investments (Europe).

S&P Report
http://www.funds-sp.com/servlets/com.sandp.urls.PDFFetcher?key=eq1SB017693.pdf&type=0&lang=en

Legg Mason Factsheet
http://www.leggmason.co.uk/lmi/literature/pdf/ut/us_equity_fs.pdf

Press Release on the new UK fund
http://www.leggmason.co.uk/lmi/press_office/press_releases/US_Equity_Launch_Release_08_01_03.pdf

Interesting article on Bill Miller
http://www.leggmason.co.uk/lmi/news/CFI_BM_cover_feature_April_%2003.pdf

I think in any actively managed fund where the manager plays a key role and it is not the methodology which can be passed on from manager to manager, you have the concern about change of management. I would likley be investing out of a tax-protected shell (though that is possible) and so I'm thinking ahead to not wanting to redeem the shares before retirement because a new ineffective manager has come aboard. One way to mitigrate this is that at present I plan 50% total equity exposure, 10% UK, 10% US etc and so any one fund won't hold a high percentage of the total invested. Splitting half index, half actively managed would go someway to reduce the expenses and limit any damage but also caps the potential upside.

I noted in a recent Bill Miller commentary that he is scornful of the idea that small cap beats out large cap on returns. I too find some of his investments usual but his recent article about Amazon pricing & potential (linked in my original post) was interesting. I was expecting to find the taletale sign Bogle allured to of the larger the sum to invest the worse the returns become until you become an expensive index fund essentially. I understand in Peter Lynch's final investing years he was struggling under the weight of too much money. He's clearly knowledgeable in history & many other subjects judging by his written reports, highly intelligent and takes a somewhat unusual approach to traditional value investing. I don't think I will be willing to pass up the opportunity to invest a select percentage there. His outperformance actually made me laugh it was so wide of the margin. I hope he writes a book in retirement!


Bookm wrote:
Greetings Pete. I'm curious about having a UK equivalent of a particular fund. How does that work? Is is actually a Legg Mason fund you'd invest in?

Bill Miller has become famous as the only fund manager to have better returns than the S&P 500 index for (IIRC) 10 years in a row. And he's working on yet another year of outperformance in 2003. Which is quite amazing, considering all the factors working against him. LMVTX sports a hefty ER (1.72%) according to M*, with 11.4 Billion in assets. How a value fund outperformed the S&P500 index in the go-go-growth years of the 90's is a mystery. Being on such a winning streak would make anyone wonder when (not if) his luck will run out, when will his performance revert to the mean. Also, how much longer will he stay with this fund? Not to mention his new-found affection for tech/internet-related stocks like Amazon and Nextel, the fund's two largest holdings, and totaling nearly 15% of net assets.

If I would have held this fund for the past 10 years, I'd have a big smile. Debating on holding it for the next 10 years, I'm not so confident. Maybe there's room for LMVTX in a well-diversified portfolio looking for an investment with a value tilt. After all, it would only be one piece among several pieces. I would just be well beyond my own confort zone having a fund's fees hovering around 10% of it's 10 year annualized returns. (1.72%/16.67%) Again, that's just me. Rolling Eyes

Bookm


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peteyperson
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Joined: 26 Nov 2002
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PostPosted: Mon Sep 29, 2003 1:49 am    Post subject: Reply with quote

Bookm,

Further investigation has shown that FranklinTempleton also have offered Luxembourg-registered funds, then Dublin ones that mirror US established ones available to US investors. They are now setting up UK OEIC Open ended investment company mutual funds that are true UK investments and mirror the US funds. This has the benefit of retaining the performance track history of the US fund on a new UK fund. They are offering a free transfer to investors of the Dublin fund and closing it down.

Seems to be a trend. Hopefully Vanguard will catch onto the European market ETFs and UK Mutual fund options, they've already gone the Dublin route albeit with $100k minimum investment open to few..

Petey
Bookm wrote:
Greetings Pete. I'm curious about having a UK equivalent of a particular fund. How does that work?


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