FrontPoint Partners received redemption requests for an additional $500 million for the first quarter, confirmed a source who asked not to be identified.
Combined with withdrawals of about $3 billion in the fourth quarter, FrontPoint's assets will be down about 47% from the $7.5 billion managed by the multistrategy hedge fund company at the beginning of November. FrontPoint told clients in a Nov. 26 letter that was obtained by P&I Daily that it would begin 2011 with about $5 billion under management.
Steve Bruce, a FrontPoint spokesman, declined to comment on the latest round of redemptions.
About half of the fourth-quarter redemption requests involved FrontPoint's health-care hedge funds, which were closed and liquidated at the end of November after an insider trading scandal conducted by Manhattan U.S. Attorney Preet Bharara brushed the company.
On Nov. 2, Yves Benhamou, a former adviser to Human Genome Sciences, was charged with insider trading and conspiracy after allegedly passing insider tips to Chip Skowron, the co-portfolio manager of FrontPoint's health-care funds. FrontPoint placed Mr. Skowron on leave pending the outcome of the inquiry. Neither FrontPoint nor Mr. Skowron has been charged with wrongdoing.
FrontPoint's executives are due to complete a management buyout before the end of March from parent company Morgan Stanley. Morgan Stanley will retain an undisclosed minority stake in FrontPoint Partners.
“As we publicly disclosed in January, we continue to move forward on the restructuring of our ownership of FrontPoint and expect to close in the first quarter of 2011,” said Erica Platt, a Morgan Stanley spokeswoman.