I will first say that I am not criticizing Bill Miller here. It's not because I'm taking up for him because he's an "active" manager, either. He's a "relative return manager", which is very different from my "absolute return" objective. So, our objectives are very different in our pursuit of actively getting what we want, as are our beliefs. With that said, I believe Bill Miller did exactly what he aimed to do. I believe he followed his funds objective. Which is, according the Legg Mason Value Trust website:

Our goal

Long-term capital growth

What we invest in

The Fund invests primarily in equity securities of large-capitalization companies selling significantly below their expected value due to market inefficiencies or uncertainties about the company. The Fund may invest in companies of any size and can invest up to 25% of total net asset value in debt securities.

Our approach

The Fund's manager uses a value-investment discipline to determine when a company's stock price represents a large discount to his assessment of the company's intrinsic value (the value of all the qualitative and quantitative aspects of the company's business). To determine intrinsic value, the manager focuses on a company's cash earnings, discounting projected future cash flows to see what they are worth today. The manager takes a long-term approach, generally holding securities for long periods to realize the growth potential, resulting in relatively low portfolio turnover.

If you read that, it says nothing of managing risk or controlling drawdown. The objective is "invests primarily in equity securities of large-capitalization companies selling significantly below their expected value", which says nothing about not losing 50% or more in a year. So, I will suggest that Miller probably did a good job and met his objective. The issue, then, is that some of his investors probably underestimated the risk and their tolerance for loss. As I've said before, a value investing strategy, or any counter trend method that bets against the trend, is high risk. In fact, it may be unlimited risk. You see, Bill Miller didn't have a predefined exit point in which he would exit a position if he’s wrong. In fact, he would actually buy more if a stock he entered when down more. That works, until it doesn't. All it took was a real bear market in stocks for him to take on heavy losses. Value investing, or any counter trend method that bets against the trend, is high risk, not less risk. As I said in Conventional wisdom has risk wrong: how it's defined, measured, and managed, nearly every blow-up in history was some method betting against the trend. The only way to truly direct and control risk is to decrease exposure to the possibility of a loss.

With that in mind, read Bill Miller to Step Down From Legg Mason Value Trust Fund to see my point.