Dec. 19 (Bloomberg) -- Bill Miller, the Legg Mason Inc. money manager whose two funds have each lost more than half their value this year, will help run a third fund as the firm tries to reverse record outflows.

Miller will be added to the Legg Mason Partners All Cap Fund on Jan. 1, Mary Athridge, a spokeswoman for Baltimore-based Legg Mason, said in an interview today. David Nelson will also be added to the management team, led by Jay Leopold.

Legg Mason is taking steps to stem customer redemptions that took $37 billion from its stock funds in the first nine months of 2008. Miller’s Legg Mason Value Trust has declined 56 percent this year after failed bets on companies including American International Group Inc. and Freddie Mac.

Miller, 58, known for guiding the $4.3 billion Value Trust to a better performance than the Standard & Poor’s 500 Index for a record 15 consecutive years, has trailed the benchmark since 2006. His $1.3 billion Legg Mason Opportunity Trust has declined 65 percent this year, while the S&P 500 has fallen 40 percent.

The $361 million All Cap Fund has declined 53 percent this year, hampered by financial holdings such as Bank of America Corp. The fund became part of Legg Mason after the company’s 2005 acquisition of Citigroup Inc.’s fund unit, and has been managed by Leopold since 2007.

Nelson manages Legg Mason American Leading Companies Trust, a $237 million fund that’s lost 51 percent this year.

Leopold and Miller have managed separate accounts using the All Cap strategy for three years, Athridge said. Leopold will retain primary day-to-day responsibility of selecting stocks, she said.

Legg Mason rose 21 cents, or 1 percent, to $21.41 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have dropped 71 percent this year.

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

Last Updated: December 19, 2008 16:44 EST