FrontPoint Partners plans to close down its $1.5 billion health-care hedge funds after a portfolio manager allegedly received tips about the results of Human Genome Sciences Inc. trials for the drug Albuferon, according to a person briefed on the firm’s plans.
The firm expects to return capital to clients before the end of this month, said the person, who asked not to be named because the funds are private.
Yves Benhamou, a French doctor and former adviser to Human Genome, was charged Nov. 2 by prosecutors in the office of Manhattan U.S. Attorney Preet Bharara with insider trading and conspiracy. He was granted $3 million bail by a New York judge on Nov. 17.
FrontPoint, which is being spun out of Morgan Stanley, said on Nov. 2 that it was “cooperating fully” with federal authorities. Chip Skowron, the co-portfolio manager of the firm’s health-care funds who allegedly received the tips from Mr. Benhamou, was placed on leave pending the outcome of the probe, FrontPoint said.
The firm, which manages about $7 billion, and Mr. Skowron haven’t been accused of wrongdoing. Steve Bruce, a spokesman for FrontPoint, declined to comment.
The FrontPoint Healthcare Flagship Fund returned 0.7% this year through September and 6.4% annualized since inception in 2003, according to an investor letter. The FrontPoint Healthcare Flagship Enhanced Fund rose 2.2% this year and 9.2% a year since its 2006 start. The firm also runs the FrontPoint Healthcare Horizons Fund.