The purpose of the assignment is to introduce the novice to the structure of the U.S. capital markets. Learners are also expected to assess the performance of the fund, consider the sources of that success, and to decide on the sustainability of Millers performance.

Based on the Bill Miller and value trust case study, answer the following questions:

12. What is Legg Mason, Inc.? What is its relationship to Value Trust? What are Legg Masons core competencies? Would you invest in Value Trust, as of autumn 2005, given the information in the case? ( Answer need in 2 pages)

Bill Miller's success is so far off the charts that you have to ask whether it is superhuman. Quite simply, fund managers are not supposed to be this good. Is it mortal genius, or is it celestial luck?" By the middle of 2005, Value Trust, an $11.2-billion mutual fund 2 managed by William H. (Bill) Miller III, had outperformed its benchmark index, the Standard \& Poor's 500 Index (S\&P 500), for an astonishing 14 years in a row. This record marked the longest streak of success for any manager in the mutual-fund industry; the next longest period of sustained performance was only half as long. For many fund managers, simply beating the S\&P 500 in any single year would have been an accomplishment, yet Miller had achieved consistently better results during both the bull markets of the late 1990 s and the bear markets of the early 2000 s. Over the previous 15 years, investors in Value Trust, one of a family of funds managed by the Baltimore, Maryland-based Legg Mason, Inc., could look back on the fund's remarkable returns: an average annual total return of 14.6%, which surpassed the S\&P 500 by 3.67% per year. An investment of $10,000 in Value Trust at its inception, in April 1982, would have grown to more than $330,000 by March 2005. Unlike the fund's benchmark, which was a capitalization-weighted index composed of 500 widely held common stocks, Value Trust only had 36 holdings, 10 of which accounted for nearly 50% of the fund's assets. Exhibit 1 presents a summary of Legg Mason Value Trust, Inc., as it stood in August 2005. While Miller rarely had the best overall performance among fund managers in any given year, and while some managers had beaten his results over short-term periods, no one had ever matched his consistent index-beating record. Miller's results seemed to contradict conventional theories, which suggested that, in markets characterized by IJames K. Glassman. "More Than Pure Luck." Washington Posr, 14 January 2004, F-01. 7A mutual fund was an invesiment vehicle that pooled the funds of individual investors to buy a portfolio of securities, stocks, bonds, and money-market instruments: investors owned a pro rata share of the overall investment porifolio. This case was prepared by Sean D. Car (MBA '03), under the supervision of Robert F. Bruner. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright ( ) (2005 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to sales dardenbusinesspublishing.com. No part of this publication may be renmdiced. shared in a retrieval system, used in a spreadsheer, or transmitted in any Jorm or by any meas permission of the Darde ecopying, recording, or otherwise withour the