William H. Miller III, one of the most successful managers in the mutual fund industry and a key to Legg Mason's success in fund sales, has formed a new company with Legg Mason which will manage a new Miller-run fund, possibly by year end.

Miller and Legg Mason of Baltimore, Md. are equal partners in a new firm, LMM LLC of Baltimore. Miller will serve as managing member, the equivalent of the chief executive, for the new firm.

LLM will be the adviser and Miller will run a new go-anywhere fund, the Legg Mason Opportunity Trust, according to a registration statement the fund filed with the SEC Oct. 8. Unlike Miller's highly ranked Value Trust fund, Opportunity Trust's investment restrictions permit Miller and LLM to invest in almost any style, primarily in the securities of U.S. companies.

Miller, through a spokesperson, declined to comment. Legg Mason executives, citing federal securities laws that limit information executives can provide about a fund while it is in registration with the SEC, declined to comment beyond confirming details in the Oct. 8 filing.

Miller and Legg Mason Value Trust have been key factors in Legg Mason's success in attracting assets recently. Value Trust, with a five-star Morningstar rating, has accounted for approximately 84 percent of the net sales of long-term funds in the Legg Mason fund family through Aug. 31, according to Financial Research Corp. of Boston, a fund tracking and consulting firm. Value Trust's approximately $11.6 billion in assets through Aug. 31 represent approximately 70 percent of all assets in Legg Mason's long-term funds, said Raymond Liberatore, an FRC analyst.

Value Trust's net sales in 1998 accounted for about 82 percent ($1.9 billion) of Legg Mason's $2.4 billion in long-term fund net sales, Liberatore said. In 1997, Value Trust represented about 61 percent of Legg Mason long-term fund net sales, Liberatore said.

The fact that one fund in a fund family's lineup attracts a large proportion of assets is not unusual for mid-sized fund families, Liberatore said.

"You'll find that with most mid-sized fund companies, they have one workhorse," Liberatore said. "They usually have one standout product."

Fund managers with strong investment performance records, either individually or in small groups, regularly switch from fund company to fund company. And small money management firms regularly serve as sub-advisers for larger fund companies, with the larger fund groups handling operational and marketing issues for the funds. It was unclear how rare Miller's 50-50 arrangement with Legg Mason is.

Jennifer Murphy, senior vice president for Legg Mason, declined to provide details about the business arrangement between Miller and Legg Mason in the new venture. Although LLM will serve as adviser to Opportunity Trust, the fund will be part of the Legg Mason family of funds, Murphy said. Opportunity Trust also will be distributed through Legg Mason's distribution arm, Legg Mason Wood Walker.

The Opportunity Trust registration statement says that LLM was formed recently but does not specify an incorporation date for the firm. The filing also makes reference to LLM having employees, but does not disclose the firm's size. The Opportunity Trust registration statement in part is dated December 1999, but it is unclear if Legg Mason plans to introduce the fund to the public at that time. It was uncertain if LLM will become adviser to additional funds besides Opportunity Trust.

Morningstar of Chicago, the fund-rating firm, named Miller equity manager of the year for 1998. Miller's Value Trust has beaten the S&P 500 for the past eight years.

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