Haynes (pictured) is optimistic about the fund’s future and says Miller’s deep-value style means the portfolio’s performance can surge as the US economy continues to strengthen.
He says that he held back from making any additions to his own portfolio before the recent correction, but says that the sell-off has provided a perfect buying opportunity. "At the end of the tax year, I was happy to hold back from making any additions to my ISA as the general market did look a bit toppy," he said.
"However, I think the June correction provided a buying opportunity – especially for those with a long-term view. My way of thinking was to take a top-down long-term view of the world, then position my portfolio accordingly."
"Certainly, the US is driving the global economy and that has been highlighted by recent economic data that came out today."
"However, the problem with mainstream US equities is that while the US economy is looking good, the broad market is looking a tad expensive. So, from a value perspective, I have gone with Bill Miller’s Legg Mason Capital Management Opportunity fund," he added.
Miller is the chairman of Legg Mason Capital Management and is one of the best-regarded fund managers in the US. His most notable feat was to outperform the S&P 500 in 15 consecutive years between 1991 and 2005.
Legg Mason Capital Management Opportunity was launched in the IMA universe in February 2009.
According to FE Analytics, it is the best-performing fund in the IMA North America sector since then, with returns of 158.56 per cent, beating the S&P 500 by more than 50 percentage points in the process.
Performance of fund vs sector and index since Feb 2009
Source: FE Analytics
However, the manager’s high-conviction style means the fund is very volatile. It lost more than 33 per cent in 2011, for example.
Haynes says that while Miller’s strategy is not for the faint hearted, it is suited to investors with a long-term time horizon.
"I saw him when he was over in the UK recently and he explained how he had had a difficult period after the financial crash," Haynes explained.
"His long-term track record is obviously very good but his deep-value strategy seemed to have had its day after the crash, as investors were more focused on defensive areas of the market. However, the economy is now improving and he invests in areas that are primed for a recovery."
"He is looking at areas that are most attractively priced, in my opinion. He runs a fairly aggressive portfolio but his three main themes – financials, housebuilders and airline stocks – all fit well with our way of thinking," he added.
Miller runs a portfolio of 54 holdings and is willing to dip into all areas of the market for value.
Legg Mason Capital Management Opportunity has 24.32 per cent in companies with a market cap between $25bn and $10bn, 14.2 per cent in mega caps and 6.92 per cent in small caps.
It has an ongoing charges figure (OCF) of 1.82 per cent.
On the same theme, Haynes says he has recently bought the Aberforth UK Smaller Companies fund for his ISA as well.
"I really have a value bias in my investments, as I feel it is a strategy that is back in favour," he commented.
"I think UK smaller companies are a good value play and so I have bought the Aberforth UK Smaller Companies fund. I like them because they are very much specialists in one area and don’t launch funds in other sectors."
"It has an exceptional long-term track record which has been based on a value philosophy whereby they look for companies with recovery potential. Up until last year, value investing in UK small caps had underperformed, but there has been a rotation in the last few months."
"I think that for a long-term investor, some of the best opportunities are in smaller businesses that have the ability to grow," he added.
The £85.6m Aberforth UK Smaller Companies fund was launched back in 1991.
Our data on the fund only goes back to 1995, since when it has returned a staggering 862.47 per cent, while its benchmark – the Numis Smaller Companies ex ITs index – and the IMA UK Smaller Companies sector have made 585.2 per cent and 517.68 per cent, respectively.
Performance of fund vs sector and index since Jan 1995
Source: FE Analytics
The fund has underperformed its benchmark over three, five and 10 years. However, it has beaten the index and is a top-quartile performer over one year.
Aberforth UK Smaller Companies has a total expense ratio (TER) of 0.86 per cent and requires a minimum investment of £1,000.
