In 1940, trader and humorist Fred Schwed Jr wrote the oft-quoted book, “Where Are the Customers’ Yachts?” Its premise is that misaligned incentives often lead to investment managers getting wealthy regardless of how the clients do.
Indeed, incentives drive outcomes, and while it is true that fees can lead to asymmetric results between manager and client, there are other insidious ways that principal-agent conflict prevents clients from doing as well as they otherwise might. We see many such examples in the course of what we do.
When we launched the systematic Miller Value Partners Leverage ETF, I predicted that it would be our best-performing fund and also the hardest to get people to buy. Almost two years since launch, MVPL’s annualized performance is north of 32%, over 1,000 basis points above the market1 as of 10/31/25. (view recent month-end performance here) It’s also our smallest fund by assets at just over $20 million today. Multiple financial advisors have told us that they can’t buy it for their clients but are buying it in their personal accounts. While we are the largest investors in all of our public funds, I personally have more money in MVPL today than in any other MVP fund. Meanwhile, the gatekeepers and research teams working diligently to protect their clients from risk have told us that leveraged products are only for short-term trading and that they cannot overcome the math of compounding.
Here we see an age-old conflict: gatekeepers’ primary concern is keeping egg off their face, while more risk-tolerant investment managers tend to focus on generating returns. In other words, managers do not always have the same limitations as clients, nor do they always rely on the same conventional wisdom that leads to conventional results. A strong 20-month track record in no way implies victory over the leverage naysayers, and it would be a tall task for the fund to continue to perform so well, but I do believe that our experience is emblematic of another pattern I’ve seen recur — that the best-performing investments are broadly doubted: no one thought selling books on the internet would work, nor did anyone think that magic internet money would one day be accepted as collateral at the world’s largest financial institutions.
So, next time somebody asks about the customers’ yachts, consider that there may be more to the story than conventional wisdom might suggest.
Bill Miller IV, CFA CMT
Miller Value Partners
@billfour
Performance data quoted represents past performance and is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the original cost. Returns for periods one year and longer are annualized. The Fund’s expense ratio is 1.39%. For the most recent month-end information, please call 888-593-5110 or visit etf.millervaluefunds.com/mvpl.
If you like this post, subscribe for more.