Which 1998 hedge fund’s near-collapse prompted a Federal Reserve-arranged rescue after the Russian debt crisis?

Long-Term Capital Management’s near-collapse prompted a Federal Reserve-arranged rescue after the Russian debt crisis.

Long-Term Capital Management, or LTCM, was a highly leveraged hedge fund founded in 1994. Its partners included prominent traders and Nobel Prize-winning economists, and it used complex strategies based on expected price relationships.

Russia’s August 1998 default and ruble devaluation disrupted those relationships and caused severe losses. Investors rushed toward safer assets, producing market conditions that were very different from LTCM’s models and leaving the fund unable to unwind positions safely.

The Federal Reserve Bank of New York helped organize a private-sector recapitalization by major financial institutions. The Federal Reserve did not directly fund the rescue, but officials feared an uncontrolled liquidation could destabilize already nervous markets.