It's been a rough couple of years for Bill Miller. His $16.5 billion mutual fund, Legg Mason Value Trust, just turned in its worst two-year performance relative to the S&P 500 since 1990, trailing the index by ten percentage points in 2006 and by 12 last year. That would be a poor stretch by any standard, but it's even worse by Miller's own: Until 2006 his value-oriented fund outperformed the index every calendar year for an astounding decade and a half.
With relatively few stocks in the portfolio - fewer than 50 at present - Value Trust has long been one of the most volatile funds in its category. But investors aren't used to seeing Miller lose, and they pulled more than $3 billion out of the fund in 2007, according to Financial Research Corp. Based on its expense ratio of 1.7%, that adds up to a $50 million annual drop in revenues from fees.