Tuesday, 29 July 2014
Last updated 17 hours ago
Jun 9 2011 | 2:23pm ET
FrontPoint Partners has unveiled is plans for a smaller future—and it is a future that will not include star hedge fund manager Steven Eisman.
Eisman, who had headed FrontPoint's financial services investments since 2004, will leave the firm at the end of the month. FrontPoint is closing all but four of its hedge funds by June 30; Eisman's two funds, Financial Services and Financial Horizons, which once managed $1.3 billion, will not be among the survivors.
FrontPoint told clients on Tuesday that only its Quant Macro, Strategic Credit, Rockbay and Direct Lending funds would continue past this month's cull. The firm had announced last month that it would shutter most of its hedge funds, including its flagship multi-strategy vehicle, following massive redemptions in the wake of an insider-trading scandal surrounding its healthcare hedge funds.
It is unclear how much the slimmer FrontPoint will manage after the restructuring, but it will be at least $1 billion.
Eisman has been talking about leaving FrontPoint for months, and was reportedly made furious by the more than $500 million in redemptions his funds suffered after the insider-trading scandal broke. FrontPoint CEO Daniel Waters had said in January that Eisman would continue to manage money for FrontPoint "for years to come;" it is unclear what relationship, if any, Eisman or his potential new firm will have with the rump FrontPoint.
Eisman's exit was first reported by AR magazine. His plans are unclear, although it seems likely that he will launch his own hedge fund.
The split between Eisman and FrontPoint coincides with an attack on Eisman by anti-tax advocate Grover Norquist, who this week issued a broadside against the U.S. Department of Education and Eisman, effectively accusing the two of seeking to drive for-profit colleges out of business, and Eisman of insider trading.
"Steve Eisman—a hedge fund manager for FrontPoint Financial Services and esteemed short-seller—and other financial executives may have worked hand in glove with Dept. of Education officials and non-profit education groups to write the gainful employment rule," which Norquist says makes it harder for students at private, for-profit schools to earn federal student aid. "This afforded Mr. Eisman and other investors intimate, inappropriate knowledge about the forthcoming gainful employment rule. Traders were then able to monetize this information by short-selling for-profit institutions' stock."
Norquist called on the Securities and Exchange Commission to launch an investigation.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…