Steve Eisman, who rose to fame betting against subprime mortgages at FrontPoint Partners LLC before leaving last year, raised $22.9 million for his new hedge fund, which started trading March 1.
Eisman, who managed more than $1 billion at FrontPoint in 2010, gathered the money for Emrys Onshore Fund from friends and family, according to a person familiar with the matter, who asked not to be identified because the information is private. The firm plans to continue fundraising with institutional investors, the person said.
“I’ve seen a lot of great managers with very long track records launching with friends and family small dollar amounts,” said Jay Rogers, president of Irvine, California-based Alpha Strategies Investment Consulting Inc., which advises family offices and hedge funds looking to raise money. “You have got to get that track record going. From his history of shorting subprime, people want to see that he’s not a one-trick pony and that he can do it again.”
Eisman, 49, gained prominence after being profiled by Michael Lewis in his book “The Big Short: Inside the Doomsday Machine” (W.W. Norton & Co., 2010). He left Greenwich, Connecticut-based FrontPoint last year amid investor withdrawals following allegations that Joseph F. “Chip” Skowron, a co-manager of the firm’s health-care portfolio, traded on insider information.
Skowron pleaded guilty to conspiring to commit securities fraud and was sentenced in November to five years in prison. A U.S. District judge yesterday ordered Skowron to pay $10.2 million to Morgan Stanley, which acquired FrontPoint in 2006. The amount consists of $3.8 million in legal fees the bank spent on Skowron’s case and 20 percent of the salary he was paid from 2007 to 2010.
Eisman’s new firm, Emrys Partners LP, based in New York, employs a long-short strategy investing in stocks and bonds across industries. Its prime brokers are Goldman Sachs Group Inc. and Morgan Stanley, according to a regulatory filing dated Jan. 19.
The firm’s “investment philosophy” involves analyzing the health of the financial system rather than looking solely at the fundamentals of individual companies, it said in a brochure dated Jan. 19 and filed with the Securities and Exchange Commission.
“While individual company analysis will always be important, the health, or the change in the health, of the financial system is the starting point of all analysis, and only when the status of financial plumbing is well understood can the analysis of individual companies and their capital structure begin,” Emrys Partners said in the brochure.
The fundraising was disclosed in a March 19 regulatory filing signed by Mark Weiner, the firm’s chief operating officer and chief financial officer. Carolyn Sargent, a spokeswoman for the firm, declined to comment.