FrontPoint Partners’ senior management and portfolio managers will become majority equity owners of the alternatives asset management subsidiary of Morgan Stanley.
Morgan Stanley Investment Management will retain a minority stake in FrontPoint under the deal, expected to close later this quarter. No other terms were disclosed.
Morgan Stanley acquired FrontPoint in 2006.
Michael Kelly, co-CEO at FrontPoint, said in a telephone interview that the move would help attract investment talent to FrontPoint. The firm currently has 18 investment teams managing more than $7 billion in 24 distinct investment strategies.
“We have to provide them with a culture that is very collaborative and entrepreneurial,” he said.
Daniel Waters, co-CEO, noted in the same interview that the firm has a “good relationship with Morgan Stanley,” adding that attracting talent “was one of the real drivers of why we would do this.”
So far this year, FrontPoint has had net inflows of $1 billion, Mr. Kelly said. The firm also has added four investment teams and five new investment strategies — U.S. event-driven, direct lending, emerging markets macro, Australia long-short equity and emerging markets health-care focusing on Brazil, India and China.
He said that the transaction would have no effect on how the firm is run.
“We will continue to be focused on generating attractive investment returns,” Mr. Kelly said. “There will be no change to our investment teams or strategies. We will continue to build and grow the business opportunistically.”
Morgan Stanley spokeswoman Erica Platt said in an e-mail response to questions that “restructuring MSIM’s relationship with FrontPoint will ultimately create both greater value for Morgan Stanley and better alignment of incentives for the management of FrontPoint.”
“We believe FrontPoint is well positioned, and we are pleased to retain an economic interest in their growth,” she said.