Legg Mason (NYSE:LM) rocketed to fame several years ago on the strength of its vaunted Legg Mason Value Trust (FUND:LMVTX) and that fund's manager, Bill Miller. Value Trust could boast that it had beaten the S&P 500 Index during every single year of the fund's existence. However, the fund finally fell short of the S&P in 2006, and it's trailing year to date in 2007 as well, prompting some to declare that Miller's fortunes have turned. In fact, many of the firm's funds have fallen on hard times in recent quarters, driving investors to yank money from the funds. But Legg Mason isn't taking these outflows lying down.

Buying their way out
Most investors have notoriously short attention spans. And when it comes to fund performance, a few quarters of subpar returns usually justify finding a new manager. Legg Mason has suffered from this short-term thinking, as investors pulled roughly $7 billion from its funds between April and June 2007. Even the flagship Legg Mason Value Trust fund has lost more than $900 million in the first part of the year, following redemptions from investors unhappy with poor performance from holdings like IAC Interactive (NASDAQ:IACI), Sears Holdings (NASDAQ:SHLD), and Countrywide Financial (NYSE:CFC).

Many investors' growing interest in international funds has placed an additional burden on Legg Mason. The firm lacks a particularly strong international presence, spurring investors seeking foreign exposure to look elsewhere. Legg Mason hopes to solve this particular dilemma, and hopefully help stop the asset outflows, by purchasing an international stock manager soon.

While it may make strategic sense for Legg Mason to expand its offerings with some strong international funds, that alone won't stop the outflows. Unless Legg's portfolio managers can turn performance around, the firm will likely face increased outflows in the coming months.

Staying the course
Of course, Foolish investors know that short-term thinking does little to advance your odds of investment success. Most investors are basing their decision to sell their Legg Mason funds on roughly 18 months of flagging performance.

But even really good managers can have periods of underperformance, and times when their style of investing falls out of favor with the market. For example, investors who abandoned their value managers in the late 1990s in favor of more growth-oriented investments soon found themselves at the losing end of the market, once stocks took a dive in 2000.

The more prudent course of action is to find a fund manager with a lot of experience in both good and bad market environments, then stick with him or her unless something fundamental changes. Consistently ditching your underperforming funds to get into the hottest-performing ones is called "performance chasing," and it rarely works out to investors' benefit.

Value in Value Trust
The basics of Legg Mason Value Trust have not changed. Yes, it lagged in 2006, and it's off to a weak start this year, but that was bound to happen sooner or later. I don't see how you can fault a manager for having his first underperforming year since 1992! While this fund is a bit too expensive for my tastes, it has a top-notch manager at the helm and a strong record behind it. Sooner or later, it'll pull out of its slump -- and I'd bet on "sooner."

In fact, right now, many of the fund's top holdings are high-quality growth stocks, including Sprint Nextel (NYSE:S), Amazon.com (NASDAQ:AMZN), and Google (NASDAQ:GOOG). That means Legg Mason Value Trust stands to make out pretty well, once growth stocks really start to rebound. So if you currently own the fund, don't be so quick to bail -- you might regret it in another year or so.

Getting a Legg up on the competition
Time will tell whether Legg Mason's shopping spree will yield positive benefits for the firm. In the meantime, most investors will be looking for fund performance to turn a corner. Until Legg can get a handle on its performance, buying an international manager to supplement its current lineup will be like slapping a bandage on a broken arm -- a temporary measure that won't heal the underlying problem. As long as investors focus too closely on short-term performance, managers such as Legg Mason will suffer the consequences or reap the rewards accordingly.

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Fool contributor Amanda Kish lives in Rochester, N.Y., and enjoys regularly scheduled shopping sprees. Amanda does not own shares of any of the companies or funds mentioned herein. Legg Mason is an Inside Value recommendation. The Fool's disclosure policy always exceeds its credit limit.