LTCM Figure Starts New Hedge Venture

Date: Tuesday, August 28, 2007
Author: HFN Daily Report

Long Term Capital Management cofounder Robert Merton is launching a new hedge fund firm.

Merton's firm, Integrated Finance, has merged with Marakon Associates to form a new company known as the Trinsum Group. In an interview with Reuters, Merton said Trinsum plans to launch a new hedge fund unit by the end of the year.

Trinsum will offer "specialty funds," according to Merton, but he declined to give further details. He also defended investments in subprime mortgages, saying there is a real need for that type of lending.

Merton won the Nobel Prize for economics in 1997. The next year, his firm he cofounded, LTCM, shocked the world when its exclusive strategy turned out to be little more than making highly leveraged bets on Russian sovereign debt. After Russia defaulted on its debt in 1998, the Federal Reserve had to engineer a billion-dollar bailout.

Fellow LTCM cofounders Eric Rosenfeld and John Merriwether have also gone on to start new hedge ventures. Rosenfeld recently started Quantum Alternatives while Merriwether heads up JWM Partners.