What 1998 Russian financial event caused a worldwide hedge-fund crisis after Russia’s debt default?

The 1998 Russian default helped cause the collapse of Long-Term Capital Management, a highly leveraged hedge fund.

Long-Term Capital Management, or LTCM, had used complex strategies and substantial borrowing to profit from small price differences. Russia’s August 1998 debt default and ruble devaluation disrupted assumptions behind those trades, while investors around the world became more risk-averse.

LTCM suffered enormous losses and faced the danger of disorderly failure. The Federal Reserve Bank of New York helped coordinate a private-sector rescue in September 1998; the U.S. government did not directly provide the bailout money. The episode demonstrated how leverage and interconnected markets could turn a regional crisis into a threat to global financial stability.