Morgan Stanley agreed to buy Greenwich, Connecticut-based FrontPoint Partners LLC, making its second hedgefund investment in as many days.

Terms of the transaction weren’t disclosed in a statement released today by New York-based Morgan Stanley. The second- biggest American securities firm by market value is paying about $400 million, or 7% of the $5.5 billion in assets managed by FrontPoint’s partner funds, said two people familiar with the transaction.

FrontPoint helps fund managers raise money, monitors their portfolio risks across a variety of investment strategies and processes trades. Yesterday, Morgan Stanley agreed to buy a minority stake in Avenue Capital Group, which has $12 billion in assets, mostly in the debt of struggling companies.

“Hedge funds have a voracious appetite for more and more capital, and the investment banks are supplying it,” a partner in the investment-law practice at New York- based Thacher Proffitt & Wood LLP, Steven Howard, said before the deal was announced.

Morgan Stanley and FrontPoint, led by Chairman Philip Duff, Morgan Stanley’s former chief financial officer, have been in negotiations for about a year.

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

Investment banks have increased their ownership of hedge funds to boost profits. JPMorgan Chase & Co. acquired control of Highbridge Capital Management about two years ago and Lehman Brothers Holdings Inc. agreed last year to buy 20% of Dwight Anderson’s Ospraie Management LP, a $2 billion hedge fund firm that invests in commodities and basic-materials companies.

FrontPoint lost a third of its assets in February after Ivory Investment Management LP ended a partnership.