Morgan Stanley Announces Acquisition of Hedge Fund Firm

October 31, 2006 (PLANSPONSOR.com) - The investment management division of Morgan Stanley has announced an agreement to acquire FrontPoint Partners, a Greenwich, Connecticut firm with approximately $5.5 billion in assets under management.

According to the announcement, FrontPoint has eleven investment teams managing 21 different investment strategies. Stu Bohart, head of alternative investments at Morgan Stanley Investment Management (MSIM), said in the announcement the firm’s acquisition of FrontPoint is further indication of Morgan Stanley’s commitment to alternative investments.

Some of FrontPoint’s management will take on leadership posts at Morgan Stanley Investment Management (MSIM) and its asset management business:

  • Gil Caffray, Managing Partner, will become Vice Chairman of MSIM and remain Portfolio Manager of the FrontPoint Multistrategy Fund;
  • Mike Kelly, Partner and Head of Manager Selection, will become the Head and Chief Investment Officer of MSIM’s Absolute Return Strategies group;
  • Arthur Lev, Partner and General Counsel, will become General Counsel of MSIM;
  • Joanne Pace, Partner and COO, will become the Chief Operating Officer of MSIM working closely with Owen Thomas, President and Chief Operating Officer of MSIM, to lead the division on a day-to-day basis; and
  • Daniel Waters, Partner and Head of the Client Advisory Group, will become MSIM’s Head of US Institutional Distribution.

The chairman of FrontPoint, Philip Duff, will stay on as a consultant to Morgan Stanley, the announcement said.

The transaction is expected to close in December 2006. The agreement to acquire FrontPoint comes on the heels of another such acquisition by Morgan Stanley to purchase a minority stake in hedge fund manager Avenue Capital Group for nearly $300 million, according to Market Watch.

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