Thursday, 27 October 2016
Last updated 3 hours ago
May 20 2011 | 11:57am ET
Freedom from Morgan Stanley is proving hollow for FrontPoint Partners.
The firm, which once managed $7 billion, is winding down most of its hedge funds and returning the money to investors. Most of the strategies will be shut by the end of the month, although FrontPoint stressed that it was not shuttering the firm entirely.
"While smaller as a result of these client requests, FrontPoint's business will continue," FrontPoint said in a statement.
FrontPoint would not say which funds would be cut and which would continue, except that its newly-raised mid-market lending fund would not be affected. The firm garnered some $1 billion for the fund in January.
The decision to return most client money comes as FrontPoint continues to suffer major redemption requests. The firm had already returned about half of its assets under management when it liquidated its healthcare hedge funds in the wake of an insider-trading scandal; it is unclear how much the firm will manage after its restructuring.
"We have received capital redemption requests from some of our clients and as always we will honor those requests," FrontPoint said. "These actions are affecting strategies differently at FrontPoint Partners and as a result we will be winding down select strategies."
FrontPoint's plans were first reported by The New York Times.
FrontPoint has been on something of a roller-coaster ride since late last year, when the hedge fund announced it would spin-off from Morgan Stanley, which bought the firm for $400 million in 2006. Not long afterwards, in November, FrontPoint acknowledged that its lead healthcare manager, Joseph Skowron, had been implicated in an insider-trading case involving a French doctor; Skowron himself was charged last month.
Investors fled FrontPoint in the wake of the scandal, but FrontPoint appeared to have stabilized matters with the lending fund. The appearance was short-lived: Star manager Steven Eisman began talking about leaving the firm, which completed its spin-off from Morgan Stanley in March.