Legg Mason Inc., the money manager best known as home to stockpicker Bill Miller, is folding Miller’s Legg Mason Capital Management division into its ClearBridge Investments equity unit as assets have tumbled.

Sam Peters, who took over management of Miller’s flagship Legg Mason Capital Management Value Trust in May, will continue to lead the LMCM unit and report to ClearBridge’s co-chief investment officers Scott Glasser and Hersh Cohen, Mary Athridge, a spokeswoman for the Baltimore-based firm, said in an e-mail. Miller will continue managing the Legg Mason Capital Management Opportunity Trust and will not be joining ClearBridge, Athridge said.

Legg Mason is reviewing its business and relationships with affiliates as it tries to reverse five years of client redemptions. The company is seeking a new chief executive officer after Mark R. Fetting stepped down in October amid pressure from activist investor Nelson Peltz. Interim CEO Joseph A. Sullivan, the former head of distribution, has said the firm is reviewing and evaluating its current business strategy and is prepared to modify it as appropriate.

Assets at Legg Mason Capital Management have fallen to $7 billion from a peak of about $70 billion in 2007. Miller led the Value Trust fund to better returns than the Standard & Poor’s 500 Index for a record 15 years before the streak ended in 2006. His performance worsened as he wagered heavily on financial stocks during the credit crisis, prompting a 55 percent decline in his fund in 2008.

Assets Plunge

The Value fund’s assets have plunged 90 percent from a $21 billion peak in 2007, to $2.2 billion as of Jan. 14, according to data compiled by Bloomberg. Last year, Miller stepped down from the Value Trust, while staying as manager of the $1.05 billion Opportunity fund. The Opportunity fund has returned 35 percent in the past 12 months, beating 99 percent of similarly managed funds, according to data compiled by Bloomberg.

Portfolios and investment teams at ClearBridge, Legg Mason’s biggest stock-fund unit with about $60 billion in assets, won’t be affected by the addition of the Legg Mason Capital Management strategies, Athridge said. There will be headcount reduction following the integration at the end of the transition period later this year, said Athridge, who declined to give a specific number. The ClearBridge unit is led by CEO Terrence Murphy.

Multiple Strategies

Legg Mason, which managed $648 billion as of Dec. 31, owns multiple investment units with different strategies, including fixed-income manager Western Asset Management Co. and equity managers such as ClearBridge and Royce & Associates. Each affiliate operates independently and has revenue-sharing agreements with the corporate parent.

ClearBridge said in October it was dropping the Legg Mason name from its mutual funds as part of a push to make its brand better known. Western Asset is seeking more control of its fund sales by trying to negotiate a move away from the centralized distribution model in which sales of retail products go through Legg Mason, a person familiar with the matter said in November.