FrontPoint Partners LLC
FrontPoint Strategic Credit Fund
Long/Short Strategy across the Asset–Backed Securities (ABS)
market.
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FrontPoint Strategic Credit Fund (“FSC”, “The Fund”) is an alternative investment fund that takes long and short positions, on a cash or synthetic basis, in asset backed securities with an emphasis on residential mortgage credit. FSC will take long and short positions primarily in structured
mortgage-backed, asset-backed and commercial mortgage-backed securities.
The principal objective of the Fund is to generate high risk-adjusted absolute returns with low correlation to the broader markets. The Fund will use proprietary research and analytic models to help target mis-valued assets in the market which will include assets in all rating categories as well as whole loans. The team employ’s a rigorous research process involving analysis of fundamental loan characteristics, general economic data and use of statistical research. The Fund will also include investments in corporates and derivatives related to the financial services and real estate sectors.
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Risk management of FSC falls into four main categories:
1) Asset selection is driven by intense research, loan level analysis, and volatility assessment
2) Monitoring of the portfolio by multiple factors including ! Product concentrations ! Size ! Value ! Leverage ! Yield ! Liquidity
3) Internally created risk metric models will be used to monitor the volatility of the portfolio under different methodologies and stress scenarios:
! Notional investment long vs. notional investment short by both rating category and product
! Market risk: use ABX or other market levels to determine yield to value portfolio
! FSC risk metric: worst case scenario across portfolio
Firm Background
FrontPoint was founded in 2000. FrontPoint is an integrated alternatives asset management firm focused on providing single strategy and multi-strategy absolute return investments to institutional investors and their advisors. FrontPoint integrates and supports its portfolio teams through a central infrastructure managed by an experienced business team who provide trading, risk management, compliance, legal, accounting, technology, administrative services, marketing, and back office functions. This structure allows the portfolio teams to spend the majority of their time on investing and generating alpha. As of July 31, 2008, FrontPoint has 15 experienced investment teams, managing approximately $10.4 billion across 8 multi-strategy vehicles and 30 single strategy funds.
In December 2006, Morgan Stanley acquired FrontPoint. As such, FrontPoint is now a part of Morgan Stanley’s Investment Management Division. The ultimate parent of FrontPoint is Morgan Stanley; a New York Stock Exchange quoted company whose shares trade under the ticker symbol MS. As of March 31, 2008, Morgan Stanley employees owned approximately 15% and represented the largest shareholder group
Principals’ Biographies
Marc Rosenthal – Co-Portfolio Manager
Prior to joining FrontPoint, Marc was responsible for the investment activities of C-BASS where he was most recently a member of the Executive Committee and Chief Investment Officer and Co-Head of Capital Markets. He served as Managing Director in the Capital Markets area since 2004 and was responsible for investment activities in residential mortgage loans and securities since his start at C-BASS in March of 2000. Prior to joining C-BASS, he spent nine years at Merrill Lynch, six of which were in the fixed income industry, and he most recently served as a Vice President in the Structured Finance area where he was responsible for organizing and structuring asset-backed deals. Marc received a BA in Economics from Cornell University and an MBA in Finance from the Stern School of Business at New York University.
Noelle Savarese – Co-Portfolio Manager
Steve Eisman – Co-Portfolio Manager
Steve has been managing the FrontPoint Financial Services Fund since 2004 and the FrontPoint Financial Horizons Fund since 2006. Prior to joining FrontPoint, Steve was a Managing Director and Senior Financial Services Analyst at Chilton Investment Co., Inc. Prior to joining Chilton, Steve was a Managing Director and Senior Investment Bank/Asset Management and Specialty Finance Analyst at Oppenheimer & Co, where he worked for over 10 years. Steve has been ranked as an All-Star analyst by both Institutional Investor and the Wall Street Journal on multiple occasions. Steve received a JD from Harvard Law School and a BA from the University of
Pennsylvania.
Peter Cerwin – Managing Director, Marketing
Prior to joining FrontPoint, Pete was a Managing Director in the Capital Markets Group at C-BASS where he was responsible for Portfolio Management and Investor Relations. His extensive
experience in the industry includes working with originators and issuers of a variety of mortgage products including subprime, subperforming, re-performing, prime and Alt-A. From 2001 to 2005, Pete was at Deutsche Bank where he was responsible for the origination of real estate-related structured products for a range of clients from large corporations to small specialty finance companies. Prior to joining Deutsche Bank in 2001, Pete was at Prudential Securities covering subprime mortgage issuers. Pete spent 13 years at Merrill Lynch where he was involved in all aspects of the residential mortgage business, including prime and subprime banking as well as MBS trading. Pete received a BA in Economics from Rutgers University and an MBA in Finance from the Stern School of Business at New York University.
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Contact Information
Name: Pete Cerwin, Managing Director
Address: FrontPoint Partners, 2 Greenwich Plaza, Greenwich, CT 06830
Main Phone: (917) 934-1837
Fax: (203) 622 -5480
E-Mail: pcerwin@fppartners.com
Miscellaneous Fund Information
Firm AUM (as of 7/31/08): $10.4 Billion
Fund AUM (as of 7/31/08): $219 Million
Firm Inception Date: November 2000
Fund Launch Date: April 2008
Valuation Currency: USD
Domicile: The Offshore Fund is domiciled in the Cayman Islands.
Fund Administrator (Onshore/Offshore):
Citco
Listed: No
Prime Broker(s): Credit Suisse Securities (USA), Lehman Brothers
Legal Counsel: Davis Polk & Wardwell
Terms
Minimum Investment: $1m for individuals, $5m for institutions
Management Fee: 2%
Performance Fee: 20%, subject to a high watermark
Hurdle Rate: No
High Water Mark: Yes
Subscriptions (frequency / notice): Monthly Redemptions (frequency / notice): Quarterly
Redemption Penalty: (Quarterly with 6% penalty) and annual thereafter (Quarterly
with 3% penalty)
Lock Up: 1st year hard lock, 2nd year soft lock
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