The financial press media are forever seeking to acclaim some mutual fund manager as the financial equivalent of the Michael Jordan of investment managers -- the "next Peter Lynch." They, along with individual investors, perform intensive searches of databases, seeking to find a fund manager with a persistent long-term record of outperformance -- while short-term outperformance might be a matter of luck, long-term outperformance must be evidence of skill.

The latest to be acclaimed as the next Peter Lynch is Bill Miller, the manager of the ( LMVTX) Legg Mason Value Trust . He has managed to do what no other current manager has done -- beat the S&P 500 index 12 years in a row. Surely that cannot be luck. Certainly you can rely on that performance as a predictor of future greatness. Before you come to that conclusion, you should consider the following historical evidence.

In each year from 1974 through 1984, the Lindner Large-Cap Fund outperformed the S&P 500 index. How were investors rewarded if they waited 11 years to be sure that they had found a true genius and then invested in the fund? Over the next 18 years, the S&P 500 index returned 12.6%. Believers in past performance as a prologue to future performance were rewarded by their faith in the Lindner Large-Cap Fund with returns of just 4.1%, an underperformance of over 8% per annum for 18 years. After outperforming for 11 years in a row, the Lindner Large-Cap Fund managed to beat the S&P 500 in just four of the next 18 years, and in none of the last nine -- quite a price to pay for belief in a discredited theory.

Not yet convinced? Consider the case of David Baker and the 44 Wall Street Fund. Baker even outperformed the legendary Magellan Fund over the entire decade of the 1970s and was the top-performing diversified U.S. stock fund of the decade. Unfortunately, 44 Wall Street ranked as the single-worst-performing fund of the 1980s, losing 73%. During the same period, the S&P 500 grew at 17.5% per annum. Each dollar invested in Baker's fund fell in value to just 27 cents. On the other hand, each dollar invested in the S&P 500 would have grown to just over $5. The fund did so poorly that in 1993 it was merged into the 44 Wall Street Equity Fund, which was then merged into the Matterhorn Growth Fund Income in 1996.

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