Mutual-fund manager Bill Miller has reached a deal to buy out Legg Mason Inc.'s stake in the entity that houses his funds, formally severing ties with the firm where he built his fame and fortune.

Mr. Miller is buying out all of Legg Mason's interests in LMM LLC, the entity that houses the funds he manages, including the Legg Mason Opportunity Trust and the Miller Income Opportunity Trust. Financial terms of the deal weren't disclosed.

The fund manager reached the high of highs during the 90s tech boom and bust and the low of lows during the financial crisis.

While running the Legg Mason Capital Management Value Trust, Mr. Miller outperformed the S&P 500 every year from 1991 to 2005, an unmatched streak made while winning then-contrarian bets on Amazon.com, Google and eBay. In 1999, he was named mutual-fund manager of the decade.

His reputation as a stock-picker who could do no wrong changed when his wager that the financial and housing sectors were being too-beaten-down proved wrong. His fund sank to the bottom of the rankings and fleeing investors shrank its assets to $2.8 billion from $21 billion. He didn't cut his losses on financial firms like Bear Stearns Cos. and American International Group Inc., which were then nearly wiped out.

In 2008, Value Trust plummeted 55%, compared with the S&P 500 index's decline of 37%

He stepped down as Value Trust's manager in April 2012 but stayed in charge of the smaller Opportunity Trust fund where he mounted a comeback. It was the No. 1 mutual fund in its category in 2012 and second-best in 2013, according to research firm Morningstar Inc.

LMM separated from Legg Mason in 2013 and had $2.13 billion in assets under management as of March 31.

The deal is expected to close near the end of the year and is subject to customary closing conditions and regulatory approval.

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

August 11, 2016 09:55 ET (13:55 GMT)

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