You have been recruited to consult for the Texas Retirement System (TRS). TRS is looking at alternative investment opportunities. They see John Bogle’s (founder of Vanguard) mantra of simply investing in index funds as particularly compelling. Yet, Miller’s historical record at Value Trust has been outstanding, and several trustees are in favor of investing with him. Your task to provide a recommendation to the trustees as to whether or not they should invest with Miller and Value Trust.
Again, the case questions are here to simply guide your analysis. You are preparing a professional report for the TRS trustees, and it should be structured accordingly. Also, don’t spend a lot of time repeating the facts of the case itself, but certainly use the exhibits to support your assessments.
1. How well has Value Trust performed in recent years? In making that assessment, what benchmark(s) are you using? How do you measure investment performance? What does good performance mean to you? 2. What might explain the fund’s performance? To what extent do you believe an investment strategy, such as Miller’s, explains performance? 3. How easy will it be to sustain Miller’s historical performance record into the future? What factors support your conclusion?
4. Consider the mutual fund industry. What roles do portfolio managers play? What are the differences between fundamental and technical securities analysis? How well do mutual funds generally perform relative to the overall market? 5. What is capital-market efficiency? What are its implications for investment performance in general? What are the implications for fund managers, if the market exhibits characteristics of strong, semi-strong, or weak efficiency? 6. As of 2005, would you recommend investing in Miller’s Value Trust? What beliefs about the equity markets does your answer reflect?