Long Term Capital Management: stop loss

[Brad De Long]

>This is the firm that Meriwether formed a few years ago
>and attracted Merton & Scholes to; a classic hedge fund, they
>did extremely well for a while.  This year they hit some snags,
>getting caught on the other side of some of this big market moves.
>
>I heard a rumor yesterday that they had hit their stop-loss (typically
>if a fund loses 50% of their capital, they have to dissolve the
>fund and give the rest back to investors) but wasn't able to
>confirm it until this morning.  Bloomberg is now reporting that
>LTCM is down 44% in August and 52% for the year.  They are
>reportedly seeking new investment from their fund participants, but
>my guess is this means they are down to $2.3B and will be out of business
>soon.
>
>In any case, it's a good answer to the question: where has all the
>money gone?
>
>Meriwether, the king of liar's poker, appears to have lost.
>
>/jordan

Lost 15% through July, then Russia and CNET. You make risky
highly-leveraged bets, and sometimes the bear eats you--even if you are
smart and well-prepared.

But LTCM is not where the money is gone, it is where the money has come from...

Brad DeLong