Morgan Stanley is nearing a no-cash deal to relinquish control of its biggest hedge fund, FrontPoint Partners, with plans to retain a minority stake for at least five years, say people close to the matter.

Morgan Stanley and executives of the $7bn (€5.3bn) hedge fund firm in recent days have been hashing out terms that would bring Morgan Stanley's full ownership of FrontPoint down to between 20% and 25%, say the people.