Morgan Stanley Could Retain FrontPoint Stake In Spin-Off

Aug 6 2010 | 3:09am ET

Morgan Stanley is nearing a deal to spin-off FrontPoint Partners, the $7 billion hedge fund it bought four years ago, but plans to retain a significant stake in the independent firm.

The Wall Street giant and FrontPoint’s management have in recent days discussed an arrangement in which no cash would change hands. Instead, Morgan Stanley would get preferred equity in FrontPoint in exchange for giving up control of the Greenwich, Conn.-based firm, The Wall Street Journal reports. That would give the bank a big chunk of FrontPoint’s profits over the next five years as Morgan Stanley seeks to recoup the $400 million it paid for the hedge fund in 2006.

After the five years, Morgan Stanley could retain its minority stake of between 20% and 25%, or end its investment in FrontPoint entirely.

While the newly-enacted Volcker rule, which strictly limits the amount banks are allowed to invest in hedge funds, is a catalyst for the current talks, Morgan Stanley has mulled withdrawing from the business for some time. FrontPoint, it seems has not proven nearly as lucrative as Morgan Stanley hoped.

FrontPoint executives have been pushing for a spin-off for more than a year. But negotiations frequently broke down over the price; FrontPoint’s leaders offered $150 million, while Morgan Stanley believes the hedge fund to be worth about $350 million.


In Depth

Whisky Business: The Ultimate Liquid Alternative Investment

Sep 15 2014 | 7:02am ET

David Robertson knows his single-malt whisky—he was the Master Distiller at the...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

The Cult of Loss Aversion: A Call to Rethink Risk in Global Macro Investing

Sep 4 2014 | 5:45am ET

In the wake of a traumatic loss, whether it is financial or personal, it is just...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

In search of the ‘new normal’ at the Fed

The Federal Reserve keeps baby-stepping toward a “normalization” of monetary policy. But just what is normal?

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.