Which investment firm’s 1998 collapse became a major episode in the Russian financial crisis?

Long-Term Capital Management’s 1998 collapse became a major episode in the Russian financial crisis and global market turmoil.

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

After Russia defaulted on domestic debt and devalued the ruble in August 1998, investors fled risky assets. Positions held by LTCM moved sharply against the fund, threatening losses that could have spread through its many counterparties. The Federal Reserve Bank of New York coordinated a private-sector recapitalization by major banks in September 1998.

The episode did not represent a government purchase of the fund. Instead, participating financial institutions provided the rescue capital and took control of the portfolio. LTCM was later wound down, and its experience became a lasting example of leverage and systemic risk.