NEW YORK — Legendary investor Bill Miller is stepping down from the Legg Mason Value Trust mutual fund at the end of April after running the fund for nearly 30 years, Legg Mason Inc. announced Thursday.
Miller, 61, who managed Value Trust during its streak of outperforming the Standard & Poor's 500-stock index from 1991 to 2005, will be succeeded by Sam Peters, who will assume the role of sole portfolio manager.
Miller will remain as chairman of Legg Mason Capital Management, but will relinquish the title of chief investment officer to Peters.
"We have had a long and thoughtful transition process going back more than six years," Miller said in a statement. "We recognized Sam as a potential portfolio manager for Value Trust when we hired him in 2005 … and last year named him co-manager of Value Trust for the purpose of succeeding me as sole manager."
Miller is known for his contrarian view of finding long-term value in companies during investor panics. But the fund's long-last streak of gains started to wane in the middle of the last decade. In 2008 the fund tumbled during the heart of the financial crisis, partly due to bad bets on financial firms like American International Group Inc. and Bear Stearns Cos.
Legg Mason has struggled to staunch outflows since the 2008 crisis. Chairman and Chief Executive Mark Fetting said earlier this year the asset manager was in the advanced stage of completing its turnaround, noting that assets in equities made up 27% of the company's total assets under management in the fiscal third quarter, the highest since June 2008.
The Legg Mason Capital Management Value Trust fund currently has $2.8 billion under management. It had $19.7 billion as of December 31, 2005.
The fund is down about 5.5% year-to-date as of Wednesday's close, according to Morningstar, lagging the S&P 500, which is down about 2% for the year. As of Sept. 30 Legg Mason reported a total of $611.8 billion in assets under management.
"April 2012 is the right time for Sam to take over," Miller said. "Over the past year, Sam and I made important adjustments to the fund's portfolio construction and characteristics, and we're both very pleased with how it is positioned."
Earlier this month, Legg Mason sold its last 19 million shares of Eastman Kodak Co., ending a year-long process of exiting its position as the one-time camera film producer's largest shareholder.
In August 2008, Miller suffered a setback when Massachusetts' pension fund fired five managers that managed its $1.8 billion U.S. equity portfolio, including Legg Mason Capital Management. At the time, the pension board said that its investment in Legg Mason Value Trust was down 27.6% so far that year, an underperformance of 15.7 percentage points and the worst of the dismissed managers. Legg Mason made no comment at the time on that termination.
Asked in December of 2008 to describe his performance that year, Miller said "terrible," "disastrous" and "awful" were words that came to mind, but added that he was expecting better for himself and other value managers in 2009. He experienced a tougher time than most value investors that year, he said.
In the spring of 2009, as his fund was underperforming, Miller said he had suffered from only one other extended period of underperformance. "We have tended to come back very fast from bad markets," he said at the time.
He predicted then that housing prices would stabilize in 2009, which would boost the economy and lead to consumer spending. At the time, Miller said he saw opportunity in financial stocks, including Wells Fargo & Co., Capital One Financial Corp., American Express Co. and some insurers, including Aflac Inc. and Prudential Financial Inc.
"While Mr. Miller was the face of Legg Mason back when he was outperforming, Value Trust has struggled with poor performance and sizeable outflows for some time now," said Sandler O'Neill analyst Michael Kim.
Miller has managed Value Trust as either a co- or solo portfolio manager since the fund's inception in April 1982. He will continue to manage the Legg Mason Capital Management Opportunity Trust, according to the firm.
Peters will also continue to co-manage the LMCM Special Investment Trust and Mid Cap strategy with Albert Grosman.
Mary Chris Gay will also keep serving as assistant portfolio manager for Value Trust, providing senior research and investment advice, the firm said.
