Veteran US fund manager Bill Miller, chairman of Legg Mason Capital Management, is working overtime to reassure investors that prospects for his funds are bright after their poor performance this year.

Miller manages US equities totalling $50bn (€39.5bn). His flagship fund, Value Trust, has beaten the S&P 500 index in each of the last 15 years and his other mandates have broadly performed in line with it. But Value Trust is 10.8 percentage points below the index after losing 6% of its value. His decision not to own any energy stocks has damaged recent performance. Last month, before the recent set back in the price of crude oil, the fund was lagging the index by 13.3 percentage points. Miller's lieutenant, Mary Chris Gay, visited London last week to reassure international investors. She said Miller had no plans to buy energy stocks despite their recent fall: "We have no plans to take positions because we believe that prices need to be much closer to their marginal cost of production." She accepted that Miller's decision to back housing stocks last year was premature, given adverse comment on US residential markets. Housebuilders recently met the US Federal Reserve to alert it to the sharp rise in cancelled sales. Miller said the Fed will take a less hawkish view of interest rates to calm sentiment. Most of his building stocks bounced back in August. Recent results from one of Miller's biggest bets, Sprint Nextel, have been disappointing. He said the recent departure of chief operating officer Len Lauer signals that more changes are on the way. UnitedHealth Group has been dragged down by controversy over the issue of expensive executive share options. "Although uncertainties regarding the scope of ‘tainted' share options resulted in a delay in the filing of its quarterly report, the good news is that the results of an independent review should be finalised by early November," Miller said. Throughout much of the year, Value Trust's holdings in internet stocks have languished. But IAC and Expedia, two of Miller's naps, jumped 20% last month. Amazon, another internet investment, rose 15% after announcing a $500m share buyback programme, the first in its history. Online auction group eBay rallied 16% following its strategic alliance with search engine Google. Miller has a big weighting in large-cap stocks and Gay said there is evidence their rally has begun. She said mid-cycle slowdowns, which make investors nervous, typically benefit large caps whose earnings are viewed as most secure. She added that the price of Miller's favoured large-cap stocks – Citigroup, General Electric and Eastman Kodak – are substantially below levels that were struck three years ago.