Bill Miller beat the market for a record 15 years before getting hit hard in the financial crisis. Since then he’s again been producing exceptional returns, and he recently offered his take on markets for CNBC.
Miller says the financial crisis led to “extreme risk aversion, evident in near-record-low bond yields. Since the crisis, risky assets, such as stocks, have done better than ‘safe’ assets, such as government bonds,” he said. “It is my opinion, and it looks likely to continue for many years.”
Miller also said risk aversion has led many fund managers to become “closet indexers”. “If you go with an active mutual fund, pick a conviction manager who has what the academics call ‘high active share’ — that is, his or her portfolio looks very different from the market,” he says.
With hedge funds focused on minimizing volatility rather than maximizing returns, Miller says that “the opportunities for truly active managers who think independently and are able to take advantage of the behavioral foibles of others are great.”
In a separate video, Miller talks about why he’s optimistic on homebuilders.