Which hedge fund’s collapse became a major concern during the 1998 global market crisis?

Long-Term Capital Management’s collapse became a major concern during the 1998 global market crisis.

Long-Term Capital Management, or LTCM, was a highly leveraged hedge fund founded in 1994. Its partners included prominent traders and financial economists, including Nobel Prize-winning economists Myron Scholes and Robert Merton.

The fund suffered heavy losses after the Russian government’s August 1998 default and devaluation disrupted assumptions behind its trading models. Investors simultaneously fled risky assets, causing price relationships that LTCM expected to converge to move farther apart instead.

Because the fund had large positions with many major financial institutions, the Federal Reserve Bank of New York helped arrange a private-sector recapitalization in September 1998. The rescue was not a government purchase of the fund, but it reflected fears that an uncontrolled liquidation could destabilize markets.