Which hedge fund was rescued in 1998 after losses linked to the Russian financial crisis?

Long-Term Capital Management was rescued in 1998 after losses linked to the Russian financial crisis. The highly leveraged hedge fund faced collapse when market prices moved sharply against its trading positions.

LTCM was founded in 1994 and used mathematical models, convergence trades, and substantial borrowing. Its partners included prominent economists and financiers, including Nobel Prize-winning economists Myron Scholes and Robert C. Merton. The strategy assumed that price relationships would return toward historical norms.

Russia’s August 1998 debt default and ruble devaluation intensified a worldwide flight from risk. Assets that LTCM expected to move together instead diverged, producing large losses. The Federal Reserve Bank of New York organized a private-sector rescue consortium; the U.S. government did not directly inject taxpayer funds.

The episode became an important example of systemic risk from leverage and interconnected trading. LTCM was not rescued because its investments were guaranteed to recover; the concern was that a disorderly liquidation could destabilize already-stressed markets.