Which investment fund’s failure intensified the 1998 global market turmoil?

Long-Term Capital Management’s failure intensified the 1998 global market turmoil.

Long-Term Capital Management, commonly called LTCM, was a highly leveraged hedge fund founded in 1994. Its partners included prominent traders and economists, including Nobel Prize-winning economists Myron Scholes and Robert C. Merton. The fund used complex strategies that expected price relationships between securities to converge.

Those relationships broke down during the 1998 Russian financial crisis. Investors rushed toward safer and more liquid assets, producing unusually large market movements. LTCM suffered enormous losses because its positions were highly leveraged and difficult to unwind without further disturbing markets.

The Federal Reserve Bank of New York helped organize a private-sector rescue in September 1998. The U.S. government did not directly provide the bailout money, but officials feared an uncontrolled liquidation could spread instability through major banks and markets. LTCM’s episode is often cited as an example of systemic risk: a relatively small fund can threaten wider markets when its financial connections and leverage are extensive.