(FORTUNE Magazine) – It's easy to be jealous of Jonathan "Jono" Steinberg. Not only is he rich--his father, Saul Steinberg, runs insurance giant Reliance Group Holdings--but he's also half of financial media's "It" couple. At 33, he owns Individual Investor, a financial media machine that includes two magazines, a newsletter, a Website and, up until recently, two hedge funds. Word has it that he dates CNBC reporter Maria Bartiromo--a.k.a. the Money Honey--whose pouty good looks have spawned a chat room of worshipers.

But it's a story that perhaps reads better than it lives. Last year Individual Investor lost $5 million. And things look worse in 1998--the company lost $2.2 million in the first quarter alone. The stock has reacted accordingly, dropping 36% in the past nine months--to a low of 5 1/8 in May.

What went wrong with Jono's budding empire? He built both his magazine and hedge funds around his affinity for small, highflying stocks, but lately he seems to have pretty bad instincts. WisdomTree, Steinberg's investment arm--which houses two hedge funds--has tanked. During the first three months of this year, the funds' net assets plummeted 30%, to $50 million.

WisdomTree caused other headaches too. Turns out that Steinberg held stocks in his fund that were also pushed in his magazine. Since he followed a rule that kept him from trading stocks appearing in the magazine within a month preceding and following publication, Steinberg says he didn't believe that Wall Street media watchers would see this as a conflict of interest. But they did. Skeptics contend he was hoping the magazine exposure would pump up his portfolio. Steinberg stopped holding magazine picks altogether last year, but he's nevertheless had a hard time salvaging his reputation. "It was sort of a no-win situation," he admits.

Few were surprised when Steinberg announced in May that he would dissolve WisdomTree. Vowing to channel his energy into the media business, Steinberg distributed the funds' remaining $39 million to limited partners. "It's a good move," says John Westergaard of Westergaard Online. "I always told Jono he would have trouble running both a publishing company and a hedge fund. It's a terrible conundrum."

Steinberg has also shaken up top management to attract new talent and boost the bottom line. Out are President Robert Schmidt and Chief Financial Officer/Director of Internet Services Scot Rosenblum--both longtime Steinberg cronies. Incoming is Mark McDonald, formerly of the very successful Men's Health, to fill Individual Investor's publisher slot, which had been empty for several months.

Now Steinberg is considering selling a portion of the company to a media powerhouse. "We're looking for a strategic partner that might be able to enhance the media operations," Steinberg says. "It could be from a traditional media standpoint or somebody who can deliver lots of traffic or open up new avenues, like radio and TV." To attract a major player like that, Individual Investor will have to transform itself into a pure financial media operation.

With WisdomTree dissolved, the company's future will certainly be less complicated, and maybe much brighter. But even without the hedge funds, the company could be a hard sell. Steinberg's conflict-of-interest antics and the company's shaky journalistic reputation could keep potential suitors at bay. What does Jono think? He seems pretty nonchalant about the whole thing. Says he: "Eventually it should [all blow over], but we'll just have to see."

--Amy Kover