Which hedge fund collapse in 1998 was linked to the Russian crisis and required a Federal Reserve-coordinated rescue?

The hedge fund collapse in 1998 linked to the Russian crisis and requiring a Federal Reserve-coordinated rescue was Long-Term Capital Management.

Long-Term Capital Management, or LTCM, suffered enormous losses after the Russian government’s August 1998 debt default and ruble devaluation disrupted market relationships on which its trading strategies depended. The fund used very high leverage and held complex positions across global markets.

The Federal Reserve Bank of New York organized discussions among major financial institutions, which provided a private-sector recapitalization and orderly management of the fund. The Federal Reserve did not directly bail out LTCM with public money.

The episode became a major example of systemic risk: a relatively small number of institutions could be endangered by one highly connected, heavily leveraged fund. It also prompted renewed scrutiny of derivatives, leverage, and the belief that markets would quickly return to normal.