Which company’s 1998 collapse helped trigger Russia’s financial crisis and a global hedge-fund rescue?

Long-Term Capital Management’s 1998 collapse helped trigger Russia’s financial crisis and a global hedge-fund rescue.

LTCM was a highly leveraged hedge fund founded in 1994. Its partners included prominent finance academics and traders, and it used complex strategies based on small price differences between related securities. Those positions became dangerous when markets moved sharply and investors abandoned assumptions about normal relationships.

Russia’s August 1998 debt default and ruble devaluation intensified the turmoil. LTCM suffered heavy losses, and the Federal Reserve Bank of New York helped organize a private-sector recapitalization by major financial institutions to prevent a disorderly unwinding.

The rescue was not a U.S. government bailout of LTCM. Participating banks supplied capital and took control of the fund. The episode became a classic example of how leverage and interconnected positions can transmit stress beyond one institution.