Morgan Stanley To Spin Off FrontPoint Partners

Morgan Stanley plans to spin off FrontPoint Partners, the Greenwich, Conn. hedge fund it bought in 2006, according to people familiar with the situation.

Morgan Stanley has been weighing the future of its stakes in several hedge funds following the passage of the financial reform billrestricting bank ownership of such funds.

Morgan Stanley spokesperson Erica Platt declined to comment on the matter.

The fund has been interviewing candidates for top positions following the spinoff, one person said. It has also informed certain employees that they may need to seek employment outside the fund following the spinoff, according to another employee.

The spinoff is expected to take place within the next three months.

It’s not yet clear which portfolio managers at FrontPoint will get a stake in the independent fund or what payments might be due to Morgan Stanley in exchange for the firm.

Earlier today, reported hearing “scuttlebutt” from a single source, who had told them about the spinoff. can now confirm that Morgan Stanley is planning the sale.

This marks the first big structural move by a Wall Street firm responding to the Dodd-Frank financial reforms. Other banks are also expected to consider selling off hedge funds.

Shares of Morgan Stanley were last more than 2 percent higher in late New York trade.