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Following Insider Trading Scandal, FrontPoint On Verge Of Collapse After LPs Pull Half Of Their Holdings

Tyler Durden's picture




 

Not even a week has passed since it was disclosed that FrontPoint was one of the
main funds benefitting from a biotech insider trading scandal (for
another possible beneficiary, see here),
and the former Morgan Stanley fund is on the ropes, battling for its
survival: the reason, per Reuters, is that LPs have decided to
pull half the fund's assets, roughly $750 million. Which means that as the fund struggles to
liquidate holdings, many of which in less than liquid names which will
likely need to be internalized by investment bank prime brokers, various
biotech stocks are about to see some notable selling pressure. One wonders why Morgan Stanley was rushing to spin off the soon to be defunct asset manager...

From Reuters:

Investors
in hedge fund firm FrontPoint's healthcare portfolios have asked
managers to return about half the assets, or about $750 million, after
the fund and its top manager became embroiled in an insider trading
case, a source familiar with the matter said on Monday.

The
Greenwich, Connecticut-based hedge fund firm has also extended the
redemption deadline to Dec. 1 from Nov. 15 to receive money back on Dec.
31, FrontPoint's co-chief executive officers told their investors late
last week.

Below we present the top 25 stock holdings of FrontPoint which will likely not do all that hot in the coming week as liquidations ensue.

 

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Mon, 11/08/2010 - 10:44 | 707940 SheepDog-One
SheepDog-One's picture

What? They dont own any Apple or NetFlix? Well thats their problem right there!

Mon, 11/08/2010 - 11:05 | 707990 RedwoodTree
RedwoodTree's picture

Was going to comment, and then realized the first 4 commentors said everything that's needed ROFL...touche.

and good to see ZH finally got rid of those FUCKING cramer ads on the site...

 

Mon, 11/08/2010 - 10:46 | 707944 wagefreedom
wagefreedom's picture

What did mommy Morgan know and when did she know it?

Mon, 11/08/2010 - 10:53 | 707954 Chappaquiddick
Mon, 11/08/2010 - 11:11 | 707998 goldsaver
goldsaver's picture

In Canadian Dollars. Canada is not playing the QE game, so I fully expect that as gold approaches $5k US the CND/USD exchange rate to be about 1:5. Also, as a miner, he has to look at worst case scenario in projecting production schedules and viability of the mining project. So he is looking at a floor of 975 Canadian.

Tue, 11/09/2010 - 04:55 | 711237 Chappaquiddick
Chappaquiddick's picture

Interesting take - I was thinking solely USD - I watched it again, its ambiguous.

Mon, 11/08/2010 - 10:59 | 707971 ZackAttack
ZackAttack's picture

No Chinese solars either. These guys are obviously not players.

Mon, 11/08/2010 - 11:05 | 707987 RedwoodTree
RedwoodTree's picture

Was going to comment, and then realized the first 4 commentors said everything that's needed ROFL...touche.

 

and good to see ZH finally got rid of those FUCKING cramer ads on the site...

 

Mon, 11/08/2010 - 11:11 | 708002 zoogle
zoogle's picture

Even tax sheltering UBS is better.

Mon, 11/08/2010 - 11:40 | 708082 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Why are people pulling their money? Isn't frontrunning legal these days and the best way to make a fortune? </sarcasm>

Mon, 11/08/2010 - 13:21 | 708454 Young
Young's picture

Same FrontPoint as Steve Eisman?

Mon, 11/08/2010 - 13:51 | 708620 hedgie
hedgie's picture

Yes, and Eisman's sleazy and dishonest attack on for-profit colleges could be next in the crosshairs.   See, for example, the Bloomberg story about for-profit colleges recruiting in homeless shelters--it turns out that the letter about this practice to the Department of Education was drafted by a consultant to a firm that was shorting education stocks.  She pretended to be a journalist (well, okay, she did get a reporter at Bloomberg to cooperate), and got directors of homeless shelters to sign a letter denouncing supposed abuses at other shelters.  Eisman's collusion with Deputy Undersecretary of Education James Kvaal is a pretty remarkable chapter in the history of finance.  Most importantly, though, Eisman launched his jihad without ever bothering to ascertain what the government recovered on the defaulted student loans it guarantees.  Answer--over 100% of principal.  And yet Eisman testified to the Senate that over the next decade the government was going to lose $275 billion on loans to students at for-profit colleges.  I admire Eisman's work on subprime CDOs, but geez--what a lying sack of mung he is.

Mon, 11/08/2010 - 15:20 | 709053 nufio
nufio's picture

i do think the for-profit colleges are a major scam. one only has to look at the shady internet ads they pull attracting dumb money. Eisman certainly has a point with this. Governemnt might be able to recover teh student loans because afaik they are not discharged by bankruptcy. The student loan system is another big scam in my opinion.
I was an international graduate student here but a lot of my friends are still struggling with ridiculous amount of student debt but at least they have degrees from recognized universities. No recruiter would give any value to a degree from Devry university.

Mon, 11/08/2010 - 16:20 | 709304 benevolous
benevolous's picture

Thought Eisman was genius on sub-prime. How can this be happening?

Mon, 11/08/2010 - 17:47 | 709659 Forbes
Forbes's picture

FrontPoint is a hedge fund management company. One (biotech) fund blowing up is not akin to the demise of the firm--though I suppose it could trigger outflows at other funds. But still...

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