Hedge fund FrontPoint to shut down several funds

BOSTON (Reuters) - FrontPoint Partners, a $4.5 billion hedge fund firm that became ensnared in a U.S. government insider trading probe last year, said it would shut down some of its portfolios.

The decision comes less than three months after the Greenwich, Connecticut-based firm bought back the majority of its shares from one-time corporate parent Morgan Stanley <MS.N> and less than six months after it started a new portfolio that provides loans to mid-sized companies.

While FrontPoint executives tried hard to calm nervous investors about the insider trading probe that felled the firm's healthcare portfolios last year, clients kept asking for their money back, investors familiar with the firm said.

FrontPoint, which consists of a handful of funds, is known for giving its individual managers significant freedom in running them.

"We have received capital redemption requests from some of our clients and as always, we will honor those requests," FrontPoint said in a statement. "These actions are affecting each strategy differently at FPP and as a result we will be winding down select strategies."

The news was first reported by the New York Times.

In April, Joseph "Chip" Skowron, a doctor turned hedge fund manager who had run FrontPoint's healthcare portfolios, was arrested and charged with insider trading after he allegedly showered another physician with cash and a luxury trip for secret information.

(Reporting by Svea Herbst-Bayliss; Editing by Lisa Von Ahn)