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number cruncher

What are we looking for?

U.S. equity funds in the doghouse for five years.

Given that the U.S. stock market is very tough for active managers to beat, let's see how badly some have fared.

The screen

We ranked the 15 worst-performing mutual funds invested in large-cap U.S. stocks over five years to March 31. U.S. dollar, segregated and duplicate versions of funds were excluded.

What did we find?

Former U.S. star mutual fund manager Bill Miller has never regained his Midas touch.

His CI Value Trust shed the most red ink with an annualized loss of 12 per cent versus a 1.1-per-cent loss for the S&P 500 Total Return Index in Canadian dollars.

Mr. Miller, famed for his Legg Mason Value Trust beating the S&P 500 for 15 consecutive years to 2005, was hired during his hot streak by CI Investments Inc. Two years after being named Morningstar Manager of the Decade in 2000, the contrarian investor began running the CI fund.

Because of his recent sub-par numbers, CI says it has decided to "end the relationship" with Mr. Miller of Baltimore, Md.-based Legg Mason Capital Management. His fund will be handed over on June 6 to CI's Boston-based Cambridge investment team headed by Alan Radlo.

"The performance just hasn't been there," acknowledged CI Investments president Derek Green. "We gave them [Mr. Miller's team]a full investment cycle and more before we made this decision…

"He performed quite well in the beginning, but the [rising]Canadian dollar and not owning commodities led to underperformance," Mr. Green said. "But going through the financial crisis is really where we got hurt."

Mr. Miller's undoing stemmed from holdings in many badly beaten-up financial stocks, including failed Lehman Brothers and Bear Stearns, during the global credit crisis in 2008. His fund lost nearly 50 per cent that year. While it snapped back 20 per cent in 2009, it went nowhere in the next 15 months as the U.S. market rallied.

A big part of recent underperformance stems from the rising loonie because CI Value Trust does not hedge its U.S. currency exposure back to Canadian dollars. "When we created the fund, it was designed to replicate as close as possible the Legg Mason Value Trust, which was a very famous fund," Mr. Green recalled. "But they were investing from an American and not a Canadian perspective."

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