FIN465 - LTCM Presentation (edit1)

FIN465 - LTCM Presentation (edit1) - Long-Term Capital...

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Click to edit Master subtitle style 4/27/11 Long-Term Capital Management LTCM
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4/27/11 The Beginning Founded in 1994 by famed Salomon Brothers bond trader, John Meriwether. 80 founding investors. $1 billion hedge fund. Initially an arbitrage fund. Evenutally became a macro fund that increased overall risk.
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4/27/11 The Fall Late 1998, Russia defaults on its debt and investors fled to high-quality liquid investments. LTCM looses $550 million in one day and $2.1 billion in August! LTCM attempts to raise capital to meet its margin
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4/27/11 What are Hedge Funds Very specialized private investment company- allows the use of variety of investment techniques (borrowing money, short selling and using options) The term “hedge fund” is not a legal term, but rather an industry term. Usually either a limited partnership, limited liability corporation or an offshore
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4/27/11 Classification of Hedge Funds Macro funds- take speculative positions in financial markets Relative value or Arbitrage Funds- use sophisticated models to detect arbitrage opportunities CFA Institute categorizes: Long/short funds, Market-neutral funds, Global macro funds and Event-driven funds
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Risks Associated with Hedge Illiquidity Potential for mispricing
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This note was uploaded on 04/26/2011 for the course BUSINESS A 00 taught by Professor Misc during the Spring '11 term at Saint Louis.

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FIN465 - LTCM Presentation (edit1) - Long-Term Capital...

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