FrontPoint Partners will close some of its hedge funds after clients asked to withdraw money amid charges a manager benefited from an illegal stock tip.
“We have received capital redemption requests from some of our clients,” Steve Bruce, a spokesman for Greenwich, Conn.-based FrontPoint, said in a statement Friday. The firm “will be winding down select strategies.”
FrontPoint oversaw $7 billion at the start of November before Chip Skowron, a co-portfolio manager of its health-care funds, was tied to claims by prosecutors that the firm got advance notice on drug-trial results. U.S. officials are pursuing a crackdown on insider trading at hedge funds, with more than 40 people pleading guilty or facing criminal charges or civil lawsuits for benefiting from non-public information.
FrontPoint's assets had slipped to $4.5 billion by January and the firm closed its health-care funds. The New York Times reported earlier Friday that FrontPoint planned to shut most of its hedge funds by the end of May.
FrontPoint will honor requests by investors to pull money, Mr. Bruce said in the statement. The firm plans to maintain its “core” hedge funds, he said.
“While smaller as a result of these client requests, FrontPoint's business will continue,” he said.
Prosecutors charged Mr. Skowron with fraud last month. He was accused of avoiding more than $30 million of trading losses after a French doctor serving as a consultant to Rockville, Md.-based Human Genome Sciences Inc. passed on that a hepatitis treatment had adverse effects during trials.
Mr. Skowron will plead not guilty, his lawyer, James Benjamin Jr., said in an April 14 statement. Yves Benhamou, the French doctor who is alleged to have tipped Mr. Skowron to inside information, pleaded guilty on April 11 and is cooperating with U.S. prosecutors.
New York-based Morgan Stanley bought FrontPoint in 2006 for $400 million as part of a push into alternative assets. FrontPoint managers in March bought back a majority stake in the firm.