Mutual Fund Managers: The Legends

While there have been thousands of mutual fund managers since the creation of the first modern mutual fund in 1924, only a handful of managers have risen to legendary status. Becoming a legend requires a great deal of skill, luck, and timing; meet the managers who had it all.

Bill Miller – Legg Mason Value Trust

Bill Miller is the Chairman and Chief Investment Officer of Legg Mason Capital Management, but is best known as the Portfolio Manager for the Legg Mason Capital Management Value Trust (LMVTX), a position he now shares with his successor Sam Peters. Miller rose to fame during the 1990s as a spectacular money manager when he consistently beat the S&P 500 for many years in a row; in fact, Miller’s net (after fee) returns on the Value Trust beat the performance of the S&P 500 index each year from 1991-2005 – 15 consecutive years! However, Miller attributes the vast majority of this winning streak to luck and timing, saying that if the year had ended on different months he would not have maintained his record throughout the years.

Quote: “The market does reflect the available information, as the professors tell us. But just as the funhouse mirrors don’t always accurately reflect your weight, the markets don’t always accurately reflect that information. Usually they are too pessimistic when it’s bad, and too optimistic when it’s good.”

Peter Lynch – Fidelity Magellan

Peter Lynch also gained mutual fund fame through years of superior performance, though Lynch gained fame in the 1980s, a decade before Miller rose to prominence. Lynch managed the Fidelity Magellan Fund (FMAGX) from 1977 – 1990, and during those thirteen years he grew the assets under management from approximately $20 million to around $14 billion. Under Lynch’s management, the Magellan fund performed very well, returning an average of 29% per year, and beating the S&P 500 index 11 out of 13 years. Lynch also became well-known as an author of investing books, especially “One Up On Wall Street”, which explains his investing strategy. The phrase “Invest in what you know” is a constant refrain in Lynch’s books, meaning that the individual investor can pick good stocks if they pay attention to the companies and products they encounter on a daily basis.

Quote: “If you stay half-alert, you can pick the spectacular performers right from your place of business or out of the neighborhood shopping mall, and long before Wall Street discovers them.”

Bill Gross – PIMCO Total Return

Bill Gross is the co-founder and co-Chief Investment Officer of Pacific Investment Management Company (commonly known as PIMCO), and the founder and portfolio manager of the PIMCO Total Return fund (PTTRX). While our first two legendary fund managers focused on equities, Gross is the central figure in the world of bonds. He launched PIMCO in 1971 with approximately $12 million in assets; his Total Return fund is now the largest bond mutual fund in the world with approximately $240 billion in assets. Gross has also published two books, and has made waves in the stamp-collecting community for being the third person in the world to assemble a complete collection of 19th century US stamps.

Quote: “Finding the best person or the best organization to invest your money is one of the most important financial decisions you’ll ever make.”

These three mutual fund managers have become legends in the investing world due to their successful track records over many years and common-sense wisdom for the average individual investor. By studying their approaches and learning from what they have to say, the average investor may be able to make better investment decisions.