Professional money manager Steve Eisman found the ultimate big short, selling against the subprime mortgage market and making a small fortune for FrontPoint Partners LLC, a unit of Morgan Stanley.

Steve Eisman Ira Sohn

Eisman shutters Emrys Partners

Eisman’s luck may have been fleeting as he announced recently he was shuttering his hedge fund Emrys Partners LLP, which operates the Emrys Onshore Fund, according to a report in Reuters.

Eisman gained fame after being profiled in the Michael Lewis “The Big Short: Inside the Doomsday Machine .” Eisman departed FrontPoint Partners in 2011 amid investor withdrawals following charges that Joseph F. “Chip” Skowron, a co-manager of the firm’s health-care portfolio, traded on insider information. Skowron ultimately pled guilty to the charges.

After two years in operation, even high profile fund managers have found starting a new hedge fund difficult. Hedge Fund Alert broke news about the fund’s liquidation and estimated Eisman had roughly $185 million in assets after started with $23 million.

Like this article? Make sure to sign up for our free daily newsletter to get content like this delivered to your inbox

Difficulties with raising assets

Eisman isn’t alone in being a young fund having difficulty raising assets.  Several studies have pointed to the best performance among hedge funds occur when their asset base allows them to nimbly enter and exit a wide variety of sometimes illiquid markets – Eisman’s bets against opaque subprime mortgage derivatives are a perfect example.  Eisman generated a 66 percent return on that illiquid gamble, but institutional managers nonetheless tend to prefer larger hedge funds with longer track records.

Eisman thought he found his second “big short” as he was a strong opponent of for-profit institutions of higher education.

Eisma’s attack on firms that operate private colleges

At the Ira Sohn Conference in May 2010, Eisman launched an attack on firms that operate private colleges such as ITT Educational Services, Inc. (NYSE:ESI), Corinthian Colleges Inc (NASDAQ:COCO), and Education Management Corp (NASDAQ:EDMC), saying they were no better than “seamy mortgage brokers.”

“Until recently, I thought that there would never again be an opportunity to be involved with an industry as socially destructive and morally bankrupt as the subprime mortgage industry. I was wrong. The for-profit education industry has proven equal to the task.”

He did have a win, as the Department of Education took action against for-profit colleges in 2010 and many of the stocks in the sector are trading lower on the year, including ITT Educational Services, Inc. (NYSE:ESI).  All Eisman’s activism and proven ability to identify shorts did not, however, translate into institutional investors pouring large asset flows into his fund, however, an all too familiar story.