Veteran fund manager Bill Miller separates from Legg Mason

Bill Miller is chairman of Legg Mason Capital Management.

One of Legg Mason Inc.'s star stock pickers, Bill Miller, is separating from the Baltimore investment firm where he attained legendary status among fund managers for beating Standard & Poor's 500 index for 15 consecutive years.

Miller will buy Legg Mason's share of LMM LLC, a jointly owned investment manager that oversees the Legg Mason Opportunity Trust and Miller Income Opportunity Trust, which have a combined $1.8 billion in assets under management. Financial terms were not disclosed.


Analysts said the deal, expected to close late this year or early next, is an unsurprising next step for both Legg Mason, which will shed the small LMM to focus on larger affiliates, and Miller, whose role at Legg Mason has diminished since his market-beating heyday.

Western Asset Management, with about $460 billion under management, is the largest of the nine affiliates on which Legg Mason has focused its growth strategy. Meanwhile, LMM's $1.8 billion in assets represent less than 1 percent of Legg's total $747 billion in assets under management.


"People got enamored with Legg Mason because of Bill Miller and because of the track record he had, and it was detracting from the fact that Western Asset Management is by far the most important part of the business," said Greggory Warren, a senior stock analyst for Morningstar Inc.

Holding onto a fund manager as small as LMM does not fit with Legg Mason's broader strategy, said Macrae Sykes, a research analyst for Gabelli & Co.

"It's indicative of Legg Mason corporate trying to refocus on building the scale and capabilities of their core affiliates," Sykes said. "This was just another, I'd say, minor housekeeping aspect."

Legg's stock remained relatively unchanged Thursday, closing at $33.91 a share.

The deal formally ends Miller's 35-year tenure with Legg, a bookend that Warren said has been coming for years.

As the long-time manager of the Legg Mason Capital Management Value Trust, Miller gained fame as a stock picker in the 1990s and early 2000s. His 15-year streak ended in 2006, and the fund suffered after the 2008 stock market crash and subsequent recession.

In 2012, Miller stepped down from his leadership role of Legg Mason Capital Management Value Trust, which reached a peak of $20 billion in 2007. The fund was taken over by Legg Mason affiliate ClearBridge Investment and renamed ClearBridge Value Trust. The fund currently has $2.27 billion in assets under management.

Miller continued to oversee the Legg Mason Opportunity Trust. In 2014, he and his son, Bill Miller IV, founded the Miller Income Opportunity Trust.


"He's been a smaller and smaller part of the business for years," Warren said of the elder Miller.

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Over a year ago, Miller and LMM took another, more physical step away from Legg — the firm moved from the Legg Mason tower in Harbor East to offices at 1 South St.

In a statement announcing the deal, Miller said it "affirms my ongoing commitment to managing our funds and to our investors."

"I am excited about the future of LMM, and our team is dedicated to our long-term, value-driven approach and to true active management," he said.

LMM will remain in Baltimore and maintain its current investing strategies, said Bill Miller IV.

"It's an exciting thing for us to now be on our own," he said.