“The muni high-yield space now is littered with things that most investors couldn’t even identify as municipal bonds,” says Nicholos Venditti, a portfolio manager at Thornburg Investment Management. He points to bonds issued for the American Dream mall and untested recycling facilities that seek to create ambitious new products, such as sustainable jet fuel. “Those are venture capital-like deals that were priced with muni-like yields, and ultimately what’s happening is that they’re reverting back to venture capital-like yields, where they should have been in the first place.”
Miller started small. A Columbus, Ohio, native, he graduated from Duke University before going to Northwestern and completing a master’s degree in economics. Instead of continuing with a Ph.D., he worked first as an actuary, then joined the Chicago investment advisory firm C.W. Henderson & Associates. As an analyst there, he learned the foundations of the muni market. Craig Henderson, the firm’s president, recalls that even in those early days Miller was drawn to the quirky niches of the market that Henderson’s firm tended to avoid. “High-quality munis were just a little too boring for John,” Henderson says.
At Nuveen’s office just blocks away, Paul Williams, who headed the firm’s municipal research group, was looking for a new credit analyst. He recruited Miller, impressed by his knack for evaluating muni credits that involved corporate and nonprofit borrowers. Miller’s first big test came in the late 1990s. CanFibre of Riverside Inc. was as risky as it gets in the municipal bond market, a speculative project based on untested technology—turning discarded wood into fiberboard for kitchen cabinets. Miller loved it. “I just thought it was a fantastic idea,” he says. He persuaded Nuveen’s portfolio managers to buy it. At first it traded well.
Then CanFibre’s corporate backer, Enron Corp., collapsed, and California energy prices skyrocketed. CanFibre’s bonds plummeted to 2¢ on the dollar. When other investors cut their losses and sold, Miller bought all the bonds, betting that even if the company failed, the highly specialized equipment and the warehouse could be sold. He was right. The equipment was sold twice, in fact: once to a Mexican company that never collected it, and then auctioned off piecemeal. Along with the plant manager, the only employee left at the company, Miller orchestrated the sale of the property in a booming California real estate market. “So we almost broke even on the whole thing,” he says.
The new millennium was robust for Miller—and the market he would come to dominate. After attending night classes to complete an MBA at the University of Chicago in 2000, Miller was named a co-manager of Nuveen’s high-yield fund, which he would manage soon after, overseeing its growth from $50 million in seed capital to $5.1 billion in 2007.
When financial markets collapsed in 2008, so did some high-yield municipal debt funds. Ronald Fielding, a veteran investment manager for OppenheimerFunds, had delivered hefty returns on debt backed by airport terminals, tobacco settlement payments, and housing developments. During the crisis, investors pulled out en masse. His fund was forced to sell securities at fire-sale prices to raise cash. His main fund’s shares tumbled by more than 50%. “I felt like I was destroying the whole market,” he remembers.
Miller’s fund was pummeled too, losing 40%. But unlike Fielding, who retired the following year, he was able to hold on for the subsequent rebound and grow the fund tenfold. “I just had more longer-dated, nonrated bonds than anyone else,” he says. “Maybe I maintained too aggressive a positioning going into ’08, no question. But the bonds themselves virtually all came back.”
Miller became known for his mastery of the technical details buried in bond documents. It’s a skill that stems from his early years as a research analyst tasked with explaining the intricacies of tangled credits to portfolio managers. He speaks a language that only those investors who’ve spent years poring through prospectuses are fluent in. He’s methodical, with an uncanny recall of the details of decades-old bond issues.
In 2011 he was named co-head of fixed income, leaving him with oversight of the firm’s state and local government bond investments—now amounting to almost $200 billion overall. But it was the high-yield corner of the market that for all of 2019 was attracting hundreds of millions of dollars each month. Even long-term debt issued by still-bankrupt Puerto Rico had rallied, cutting the yields to around 3.5% in late February, akin to what virtually risk-free borrowers such as California once paid.
By the start of 2020, more than half of the $231 billion in high-yield bonds held by institutional holders was managed by just four firms, according to data compiled by Bloomberg: Nuveen, Invesco, Goldman Sachs, and BlackRock. Miller’s funds alone received about a third of the new high-yield money that had come into the market since the start of 2019.