Morgan Stanley: A Big Bet on Hedge Funds

Buying FrontPoint is just one step in a push to modernize its entire business, says the company's head of alternative investments

Amid the rapid growth of hedge funds—assets under management have increased 21% this year, to $1.3 trillion, according to Hedge Fund Research—big Wall Street banks are jockeying for a piece of this steadily expanding sector (see, 10/13/06, "What's Driving the Hedge Fund Boom?"). On Oct. 31, Morgan Stanley (MS) announced that it's buying the hedge fund FrontPoint Partners. Just one day earlier, the investment bank announced plans to enter a strategic alliance with another hedge fund, Avenue Capital Group.

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