Eisman's FrontPoint Funds Hard-Hit In 2010

Jan 24 2011 | 11:22am ET

As Steven Eisman attempts to negotiate a new relationship with his bosses at FrontPoint Partners, his recent track record isn't adding to his leverage.

Eisman's two funds were the firm's worst performers last year. His Financial Services fund shed 8.3% in 2010, while his Financial Horizons Fund lost 7.7%, the New York Post reports. What's more, he's managing a good deal less, with the poor performance and investor redemptions cutting the funds from $1.3 billion to $725 million.

The decline is in line with that suffered by FrontPoint overall in the wake of an insider-trading scandal. That case is said to be one major cause of concern for Eisman, as he blames it for some of the redemptions he's suffered.

Eisman is seeking more control over his business as FrontPoint moves forward with its spinoff from Morgan Stanley. He said last week that his is not leaving FrontPoint "now," but the Post reports that he could launch his own firm and leave FrontPoint by the end of the year.

That does not mean that FrontPoint is about to totally lose one of its top managers, however. Eisman would reportedly continue to manage the FrontPoint funds as well as money for other investors who become clients of his new firm, and may continue to use FrontPoint's back-office operations.

"Since the end of last year, we have been in active discussions with Steve regarding evolving the nature of his relationship with FrontPoint," the hedge fund's co-CEO, Daniel Waters, told employees in a memo Thursday, the New York Post reports. "This evolution would entail giving Steve more operating flexibility and control over his own destiny."

"As part of the agreement we have been working on, Steve will continue managing money on behalf of clients for years to come," he added.


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