NEW YORK (Bloomberg) — Morgan Stanley agreed to buy Greenwich, Connecticut-based FrontPoint Partners LLC, making its second hedge-fund investment in as many days.Morgan Stanley, the second-largest US securities firm by market value, is paying about $400 million for FrontPoint, or seven percent of its $5.5 billion in assets, said two people familiar with the transaction. Terms of the transaction weren’t disclosed in a statement released yesterday by the company.

The purchase will return several FrontPoint executives to Morgan Stanley, including chairman Philip Duff, a former chief financial officer. FrontPoint helps fund managers raise money, monitor risk and process trades.

The acquisition “gives us the strong foundation we need to pursue our ambitious growth plans in alternative assets,” John Mack, Morgan Stanley’s chief executive officer, said in the statement.

On Monday, Mack, 61, agreed to buy a minority stake in Avenue Capital Group, which has $12 billion in assets, mostly in the debt of struggling companies.

Morgan Stanley managed $76 billion in hedge funds, private equity and real estate as of Aug. 31. Larger New York-based rival Goldman Sachs Group Inc. has about twice that amount in so-called alternative assets.

XL Capital will sell its shares in FrontPoint. It took a minority stake in the firm in 2001 and also invested $500 million in its funds. It has never disclosed the size of its stake.

In 2004, XL sold its interest in Pareto Partners L.P. and its affiliated entities, a currency overlay and fixed income manager, resulting in income of $35.4 million.