FrontPoint Partners LLC got withdrawal requests from investors of about $3 billion for the end of the year after a manager of its health-care funds allegedly received insider information.
FrontPoint, based in Greenwich, Connecticut, is working with several clients who have indicated they may rescind their redemption requests, and as a result it expects to start next year with $5 billion in assets, according to a letter sent to investors today. The firm had $7.5 billion under management at the beginning of November.
Clients pulled money after a portfolio manager at the firm allegedly received tips about the results of Human Genome Sciences Inc. trials for the drug Albuferon, according to a person briefed on matter. Dr. Yves Benhamou, a French doctor and former adviser to Rockville, Maryland-based 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 said on Nov. 2 it is “cooperating fully” with federal authorities. Dr. Chip Skowron the co-portfolio manager of the firm’s health-care funds who allegedly received the tips from Benhamou, was placed on leave pending the outcome of the probe, FrontPoint said.
The firm and Skowron haven’t been accused of wrongdoing. Steve Bruce, a spokesman for FrontPoint, declined to comment.
About $1.5 billion of the redemption requests were related to the health-care funds, which FrontPoint liquidated, according to the letter. Clients received about 97 percent of the funds’ net asset value in cash on Nov. 24.
Returns from FrontPoint’s health-care funds this year through Nov. 19 have ranged from a gain of 6.2 percent to a loss of 1.35 percent, according to a person familiar with the firm.
Hedge funds climbed an average of 5.4 percent this year through October, according to data compiled by Bloomberg.