The move was made to comply with the Volcker Rule provision of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits banking entities from conducting proprietary trading, and limits investment in hedge funds and private equity funds. A number of large U.S. banks are restructuring their proprietary trading desks and hedge fund management units.
FrontPoint's senior management and portfolio managers now own a majority interest in the company while Morgan Stanley became a minority investor, according to a client letter from FrontPoint co-CEOs Michael Kelly and Daniel Waters obtained by P&I Daily.
Neither Monica Everett, a FrontPoint spokeswoman, nor Ms. Platt would comment about the breakdown of FrontPoint's ownership. Ms. Everett also declined to comment about the management buyout in an e-mailed response to questions.
“We are pleased to have completed the restructuring of our ownership of FrontPoint Partners and look forward to an ongoing relationship with the firm as a minority investor,” Ms. Platt said in a telephone interview.
Morgan Stanley acquired FrontPoint in 2006. FrontPoint managed $7.5 billion at the beginning of November, but assets are expected to decline to $3.5 billion as of March 31 after two quarters of net client withdrawals totaling $4 billion.
The Goldman Sachs Group (GS) confirmed in its annual report filed with the SEC on Monday that it closed its equity proprietary trading business in 2010 and this quarter began liquidating holdings of its global macro prop desk, which had been part of its former fixed income, currency and commodities operating segment.
Stephen Cohen, a Goldman Sachs spokesman, declined to give the size of the assets managed by both prop desks. “The disclosure pretty much says it all,” Mr. Cohen said, declining further comment.
J.P. Morgan Chase's plans to move its equity, emerging markets and structured credit prop trading teams from the investment bank into J.P. Morgan Asset Management (JPM) are progressing a little faster than predicted.
In a joint internal memo dated Sept. 27 that was obtained by P&I Daily, Jes Staley, CEO of J.P. Morgan Chase's investment banking division, and Mary Erdoes, CEO of J.P. Morgan Asset Management, predicted that the transition would take several years. However, a source with knowledge of the bank's plans who asked not to be identified said integration of the trading teams into J.P. Morgan Asset Management likely will take place over the next 18 months.
The source also said the new direct hedge fund investment team within the asset management unit will be seeded with about $2 billion of assets by J.P. Morgan Chase and confirmed that Michael Stewart, who now is managing director and co-head of the bank's global emerging markets business, still will lead the new hedge fund alternative investment group.
Charlotte F. Powell, a J.P. Morgan Chase spokeswoman, declined to comment.