Miller’s contrarian approach worked for years as his Legg Mason Value Trust fund annually outperformed the S&P 500 from 1991 through 2005. But it plunged in 2008 and trailed the index in two of the three ensuing years, leading to investor redemptions. Miller stepped down as Value Trust manager in April 2012.
Larger Losses
Miller rebounded running the $1.3 billion Legg Mason Opportunity Trust, generating average annual returns of 26 percent from 2012 through 2015. This year, he has once again suffered larger losses than the broader market, with the fund plunging some 28 percent so far in 2016, compared with a 9.2 percent decline for the S&P 500 counting dividends.
Miller no longer works at Legg Mason, and runs the Opportunity Trust through LMM, a Baltimore-based investment adviser that he owns along with his son John and his former employer. LMM filed to set up several mutual funds under the Millers’ name in 2013 and on Jan. 28 received clearance from the SEC to open Miller Value Partners, according to the agency’s website.
Madelyn Dillabough, a Legg Mason spokeswoman, said in an e- mail that Miller’s arrangement with LMM remains unchanged.
John Seo, co-founder of Fermat Capital Management, a Westport, Connecticut, firm that invests in catastrophe bonds, said he could envision a broader use of the earthquake modeling. While Wall Street traders and companies often have extensive data on how their portfolios would perform in a market crash, they seldom know how likely such a downdraft would be.
“That’s where the earthquake guys come in,” Seo said. “They are good at assigning probabilities.”