Which hedge fund’s near-collapse followed the 1998 Russian financial crisis and required a private rescue?

Long-Term Capital Management’s near-collapse followed the 1998 Russian financial crisis and required a private rescue.

Long-Term Capital Management, commonly called LTCM, was founded in 1994 by John Meriwether. Its partners included prominent traders and two Nobel Prize-winning economists, Myron Scholes and Robert C. Merton. The fund used highly leveraged mathematical trading strategies that initially produced strong returns.

Russia’s August 1998 default and devaluation created extreme market movements. Positions that were expected to offset one another became difficult to unwind, while investors crowded into safer assets. LTCM’s losses threatened to spread through its many large counterparties.

The Federal Reserve Bank of New York helped organize a consortium of major financial institutions. In September 1998, the consortium recapitalized the fund without a direct federal bailout. LTCM was later wound down. The episode became a classic warning about leverage, crowded trades, model risk, and the possibility that a seemingly diversified institution can still create systemic danger.