LTCM founder to launch new hedge fund

Date: Friday, May 11, 2007
Author: Paula Schaap, Financial News

Three alumni of Long-Term Capital Management, the 1998 collapse of which remains the most notorious hedge fund blow-up, are reportedly reuniting to start up a new alternatives business.

LTCM co-founder Eric Rosenfeld, along with his former LTCM colleagues Robert Shustak and Bruce Wilson are opening Quantitative Alternatives based in Rye Brook, New York, according to Bloomberg. The new fund will rely on computers to choose investments, Bloomberg said.

Rosenfeld has been wandering in the hedge fund wilderness since LTCM collapsed in 1998 after it lost $4.6bn (€3.4bn) in a few months. LTCM was over-invested in Russia when the country defaulted, which necessitated a $3.5bn bailout arranged by the New York Federal Reserve Bank.

Rosenfeld became a partner in hedge fund JWM Partners and, most recently, was president of Paloma Partners, a Greenwich, Connecticut-based hedge fund. Paloma Partners confirmed Rosenfeld was no longer with the firm.

Last year, LTCM's other founding partner, Nobel prize-winner Robert Merton, closed his new fund, IFL, after it failed to attract investors.

Separately, hedge fund Amaranth Advisors, which imploded last September losing $6.4bn, has agreed to pay $716,819 to settle charges brought by the Securities and Exchange Commission. The SEC alleges Amaranth unlawfully sold securities short in offerings and then covered those positions with securities bought in the offerings.

The short-selling charge is not related to do with the funds’ collapse when it lost $6.4bn in the natural gas markets, the SEC said. Amaranth agreed to the settlement without admitting or denying the charges.