Oct. 30 (Bloomberg) -- Legg Mason Inc. plans to cut about one-third of the jobs at Legg Mason Capital Management, the first layoffs at its investment unit run by Bill Miller, after assets fell by 53 percent this year.

As many as 50 of 147 employees will be dismissed, primarily from research support, compliance, legal and operations, Mary Athridge, a spokeswoman for the Baltimore-based fund company, said in an interview today. No senior investment managers or research analysts will be fired.

The unit's assets have dropped to $28 billion from $59.7 billion at the start of the year as clients withdrew money and investment losses increased. Miller's Legg Mason Value Trust, famed for beating the Standard & Poor's 500 Index for a record 15 years, has declined 51 percent in 2008. Miller said in an interview last month he plans to continue running the fund.

``Even with his challenges, Bill Miller has been recognized as one of the better investors,'' Jeffrey Hopson, an analyst with Stifel Nicolaus & Co. in St Louis, said in an interview. ``This unit has always been identified with Bill Miller, and if you take him away, I'm not sure there's enough there.''

Miller declined to comment today.

Legg Mason Chief Executive Officer Mark Fetting said yesterday that Miller is reviewing his investment style and may make changes. The fund, now in its third year of trailing the S&P 500, lags behind 99 percent of its rivals in 2008, Bloomberg data show. Its assets, once as high as $22 billion, fell to $5.8 billion as of Oct. 20.

`Unprecedented'

``Given the unprecedented market environment and its impact on our assets under management, Legg Mason Capital Management made the very difficult decision to reduce its staff by one third,'' Athridge said.

Legg Mason Inc. managed $841.9 billion as of Sept. 30 and employs about 4,220 workers. The job reductions at Miller's unit were reported today by the Baltimore Sun.

Fetting said his company plans to cut expenses by as much as 20 percent.

The dismissals in Miller's division are separate from other ``corporate initiatives,'' Athridge said. Each of Legg Mason's eight affiliates, which include Clearbridge Advisors and Bruce Sherman's Private Capital Management, will make their own decisions on job cuts, she said.

Legg Mason yesterday reported its third straight quarterly net loss on costs to prop up its money funds. Excluding those expenses and other items, Legg Mason beat analysts' earnings estimates. Withdrawals from stock and bond funds were also lower than in the past two quarters.

Stock Gains

Legg Mason gained $3.84, or 23 percent, to $20.76 at 4:02 p.m. in New York Stock Exchange composite trading. Yesterday, the stock surged 30 percent. Legg Mason has fallen 72 percent this year, more than double the 35 percent decline by the Standard & Poor's 500 Index.

Wachovia Corp. analyst Douglas Sipkin raised his rating on Legg Mason shares to ``outperform'' from ``market perform'' today. Jefferies & Co.'s Daniel Fannon raised his rating to ``buy'' from ``hold,'' citing in part the cost-cutting initiatives.

``With the news of expense cuts, some of the overhang is starting to fall away,'' said Michael Yoshikami, president and chief investment strategist of YCMNET Advisors in Walnut Creek, California. The firm, which manages $900 million in client assets, bought 700,000 shares of Legg Mason on Oct. 27.

Money managers including Janus Capital Group Inc. and AllianceBernstein Holding LP have said they will cut jobs. Fidelity Investments, the world's largest mutual-fund company, and Franklin Resources Inc. are reviewing cost reductions including layoffs.

To contact the reporter on this story: Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net.

Last Updated: October 30, 2008 16:37 EDT