He was accused of abusing Nuveen’s market power to quash competition. A Dallas-based upstart, Preston Hollow Capital, sued Nuveen, alleging the company and Miller used its market power to strong-arm the biggest banks on Wall Street to stop doing business with the smaller rival. Last July at the trial, in Delaware Chancery Court, Miller said he was only blustering when he boasted of persuading the banks to spurn Preston Hollow. “Sometimes you have to exaggerate to get people’s attention, especially on Wall Street trading desks,” he said in court.
At the start of 2020, Miller’s fund continued to draw new cash. Some of his biggest wagers were paying off. After he expanded his holdings of debt Puerto Rico had issued as part of its bankruptcy, the securities continued to rise. Chicago’s junk-rated school system debt rallied. The Virgin Train-backed bonds ticked up, too.
In the second week of March, as investors began to come to grips with the dramatic impact the coronavirus would have on the economy, the market turned on a dime. The bonds backing the American Dream mall dropped to as low as 97.25¢ on the dollar in late March, down from 120¢ when they last changed hands in September.
In 2008, Miller weathered his fund’s 40% drop, bouncing back to return 42% in 2009. In 2013 his fund lost nearly 5% when the taper tantrum roiled fixed-income markets, only to come storming back with a gain of almost 20% the following year. When Donald Trump’s surprise victory in the 2016 presidential election threw the markets into a frenzy, Miller’s fund saw outflows. Again, he rebounded, posting 12% returns in 2017.
High-yield munis would need another recovery to make up for the losses seen in March alone—a 10% drop as of March 26. Miller’s fund could face further pressure as more investors see the negative returns and pull their money, a dynamic that has affected municipal mutual funds during prior periods of stress.
“I do have a lot of experience handling stressful environments under periods of uncertainty,” Miller says. It was March 18, and his fund would go on to drop 14% in a week. “Munis have always come back strong,” he says, “Muni high-yield has always come back strong.”
This article was provided by Bloomberg News.