Which hedge fund’s near-collapse intensified market turmoil during the 1998 global financial crisis?

Long-Term Capital Management’s near-collapse intensified market turmoil during the 1998 global financial crisis.

Long-Term Capital Management, or LTCM, was a highly leveraged hedge fund founded in 1994. Its partners included prominent traders and academic economists, including Nobel laureates Myron Scholes and Robert C. Merton. The fund used large positions in supposedly converging prices, relying on models and borrowed money.

The Russian government’s August 1998 debt default and the resulting flight to safer assets caused those relationships to break down. LTCM suffered enormous losses and faced the risk of disorderly failure, which could have affected major financial institutions that were its counterparties. The Federal Reserve Bank of New York coordinated a private-sector rescue in September 1998; the government did not directly bail out the fund. The episode became a major warning about leverage, interconnected markets, and risks outside traditional banks.