John Meriwether in TROUBLE again....
from times online-----
TEN YEARS AGO this month a hedge fund in Greenwich, Connecticut, started losing money. It was the start of a losing streak that was to make Long-Term Capital Management (LTCM) the most infamous hedge fund in the world.
Set up by John Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers, a leading Wall Street investment bank, LTCM counted Nobel prize-winning economists Myron Scholes and Robert Merton among its directors and in its heyday had been generating returns of more than 40% a year. But from May to September 1998 LTCM lost $4.6 billion (£2.3 billion) and helped to plunge financial markets around the world into crisis.
Now Meriwether is in trouble again. JWM Partners, his latest venture, has laid off staff. Its biggest fund, a bond portfolio, has plunged 26% this year, while another fund is down 12%. Both performed poorly last year and investors are looking to get their money back.
As with LTCM, this crisis has been exacerbated by panic in the markets following the credit crunch. While investors have fled risky assets, Meriwether has sought to reassure them. In a recent letter to investors he said: “We have sharply reduced the risk and balance sheet of the portfolio.”
However, as happened 10 years ago, and more recently with the collapse of several high-profile hedge funds, sometimes the ability to control events slips from the hands of even the smartest people.
Meriwether is not the only LTCM alumnus feeling the pinch from the credit crunch.
Platinum Grove Asset Management, the $5.8 billion hedge fund group headed by Scholes, has suffered its worst performance since its inception.
Platinum Grove, which Scholes founded in 2000 with other former LTCM directors, suffered an 11.4% drop for its domestic fund and 10.7% for its offshore sister fund, according to a letter that the fund sent to investors on April 7. Same faces, same problems?
A decade on, it seems that “not much has been learnt”, said Roger Lowenstein, author of When Genius Failed: The Rise and Fall of Long-Term Capital Management. “The quote I read of Meriwether saying he was going to lower the risk was strikingly reminiscent. I think that’s what he said when he was backing out of LTCM.”
Lowenstein believes that in many ways LTCM’s collapse was the first [modern] financial meltdown, and provides interesting insights into today’s financial crisis.
The fund group used arcane financial instruments that few people, not even its overseers, fully understood. When it went under, the geographical as well as financial complexity of LTCM’s investments led to fears that it would trigger crises in financial markets across the world.
A summit of bankers and regulators eventually brokered a deal to bail out the group. The only Wall Street bank that refused to participate was Bear Stearns.
continued here:
http://business.timesonline.co.uk/t...icle3997872.ece
TEN YEARS AGO this month a hedge fund in Greenwich, Connecticut, started losing money. It was the start of a losing streak that was to make Long-Term Capital Management (LTCM) the most infamous hedge fund in the world.
Set up by John Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers, a leading Wall Street investment bank, LTCM counted Nobel prize-winning economists Myron Scholes and Robert Merton among its directors and in its heyday had been generating returns of more than 40% a year. But from May to September 1998 LTCM lost $4.6 billion (£2.3 billion) and helped to plunge financial markets around the world into crisis.
Now Meriwether is in trouble again. JWM Partners, his latest venture, has laid off staff. Its biggest fund, a bond portfolio, has plunged 26% this year, while another fund is down 12%. Both performed poorly last year and investors are looking to get their money back.
As with LTCM, this crisis has been exacerbated by panic in the markets following the credit crunch. While investors have fled risky assets, Meriwether has sought to reassure them. In a recent letter to investors he said: “We have sharply reduced the risk and balance sheet of the portfolio.”
However, as happened 10 years ago, and more recently with the collapse of several high-profile hedge funds, sometimes the ability to control events slips from the hands of even the smartest people.
Meriwether is not the only LTCM alumnus feeling the pinch from the credit crunch.
Platinum Grove Asset Management, the $5.8 billion hedge fund group headed by Scholes, has suffered its worst performance since its inception.
Platinum Grove, which Scholes founded in 2000 with other former LTCM directors, suffered an 11.4% drop for its domestic fund and 10.7% for its offshore sister fund, according to a letter that the fund sent to investors on April 7. Same faces, same problems?
A decade on, it seems that “not much has been learnt”, said Roger Lowenstein, author of When Genius Failed: The Rise and Fall of Long-Term Capital Management. “The quote I read of Meriwether saying he was going to lower the risk was strikingly reminiscent. I think that’s what he said when he was backing out of LTCM.”
Lowenstein believes that in many ways LTCM’s collapse was the first [modern] financial meltdown, and provides interesting insights into today’s financial crisis.
The fund group used arcane financial instruments that few people, not even its overseers, fully understood. When it went under, the geographical as well as financial complexity of LTCM’s investments led to fears that it would trigger crises in financial markets across the world.
A summit of bankers and regulators eventually brokered a deal to bail out the group. The only Wall Street bank that refused to participate was Bear Stearns.
continued here:
http://business.timesonline.co.uk/t...icle3997872.ece
Who invests with these guys? I mean, come on, there is dumb money, and even dumber money. For fucks sake, the rich are getting dumber, and a lot less wealthy. Oh well, maybe that'll come in handy some day...
so true. How about Neiderhoffer? Didnt he lose almost the entire funds value?
Looks like the "short gamma and pray" strategy isn't working too well this year.