Back Long-Term Capital Management Czech Long-Term Capital Management German Long-Term Capital Management Spanish Long-Term Capital Management Estonian مدیریت سرمایه بلندمدت Persian Long-Term Capital Management Finnish Long Term Capital Management French Long-Term Capital Management HE Long-Term Capital Management Italian ロングターム・キャピタル・マネジメント Japanese

Long-Term Capital Management

Long-Term Capital Management
IndustryInvestment services
Founded1994
FounderJohn W. Meriwether
Defunct1998 private bailout arranged by U.S. Fed; 2000 dissolution
HeadquartersGreenwich, Connecticut, U.S.
Key people
Myron Scholes
Robert C. Merton
John Meriwether
ProductsFinancial services
Investment management

Long-Term Capital Management L.P. (LTCM) was a highly leveraged hedge fund. In 1998, it received a $3.6 billion bailout from a group of 14 banks, in a deal brokered and put together by the Federal Reserve Bank of New York.[1]

LTCM was founded in 1994 by John Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers. Members of LTCM's board of directors included Myron Scholes and Robert C. Merton, who three years later in 1997 shared the Nobel Prize in Economics for having developed the Black–Scholes model of financial dynamics.[2][3]

LTCM was initially successful, with annualized returns (after fees) of around 21% in its first year, 43% in its second year and 41% in its third year. However, in 1998 it lost $4.6 billion in less than four months due to a combination of high leverage and exposure to the 1997 Asian financial crisis and 1998 Russian financial crisis.[4] The master hedge fund, Long-Term Capital Portfolio L.P., collapsed soon thereafter, leading to an agreement on September 23, 1998, among 14 financial institutions for a $3.65 billion recapitalization under the supervision of the Federal Reserve.[1] The fund was liquidated and dissolved in early 2000.[5]

  1. ^ a b "Too Interconnected to Fail?" Archived 2021-01-31 at the Wayback Machine Stephen Slivinski, senior editor of Region Focus, quarterly publication of the Federal Reserve Branch of Richmond [Virginia], which is the 5th of 12 districts of the U.S. Federal Reserve system, Summer 2009.
  2. ^ The Bank of Sweden Prize in Economic Sciences 1997 Archived 2006-04-27 at the Wayback Machine. Robert C. Merton and Myron S. Scholes pictures. Myron S. Scholes with location named as "Long Term Capital Management, Greenwich, CT, USA" where the prize was received.
  3. ^ A financial History of the United States Volume II: 1970–2001, Jerry W. Markham, Chapter 5: "Bank Consolidation", M. E. Sharpe, Inc., 2002
  4. ^ Cite error: The named reference Ferguson was invoked but never defined (see the help page).
  5. ^ Greenspan, Alan (2007). The Age of Turbulence: Adventures in a New World. The Penguin Press. pp. 193–195. ISBN 978-1-59420-131-8.

Developed by StudentB