Founding
| LTCM Partners | |
|---|---|
| John W. Meriwether | Former vice chair and head of bond trading at Salomon Brothers; MBA, University of Chicago |
| Robert C. Merton | Leading scholar in finance; Ph.D., Massachusetts Institute of Technology; Professor at Harvard University |
| Myron S. Scholes | Co-author of Black–Scholes model; Ph.D., University of Chicago; Professor at Stanford University |
| David W. Mullins Jr. | Vice chairman of the Federal Reserve; Ph.D. MIT; Professor at Harvard University; was seen as potential successor to Alan Greenspan |
| Eric Rosenfeld | Arbitrage group at Salomon; Ph.D. MIT; former Harvard Business School professor |
| William Krasker | Arbitrage group at Salomon; Ph.D. MIT; former Harvard Business School professor |
| Gregory Hawkins | Arbitrage group at Salomon; Ph.D. MIT; worked on Bill Clinton's campaign for Arkansas state attorney general |
| Larry Hilibrand | Arbitrage group at Salomon; Ph.D. MIT |
| James McEntee | Bond-trader |
| Dick Leahy | Executive at Salomon |
| Victor Haghani | Arbitrage group at Salomon; Masters in Finance, LSE |
John W. Meriwether headed Salomon Brothers' bond trading desk until he resigned in 1991 amidst a trading scandal.
| Myron S. Scholes (left) and Robert C. Merton were principals at LTCM. | |
In 1993 he created Long-Term Capital as a hedge fund and recruited several Salomon bond traders and two future Nobel Laureates, Myron S. Scholes and Robert C. Merton. Other principals in the firm included Eric Rosenfeld, Greg Hawkins, Larry Hilibrand, William Krasker, Dick Leahy, Victor Haghani, James McEntee, Robert Shustak, and David W. Mullins Jr.
The company consisted of Long-Term Capital Management (LTCM), a company incorporated in Delaware but based in Greenwich, Connecticut. LTCM managed trades in Long-Term Capital Portfolio LP, a partnership registered in the Cayman Islands. The fund's operation was designed to have extremely low overhead; trades were conducted through a partnership with Bear Stearns and client relations were handled by Merrill Lynch.
Meriwether chose to start a hedge fund to avoid the financial regulation imposed on more traditional investment vehicles, such as mutual funds, as established by the Investment Company Act of 1940—funds which accepted stakes from one hundred or fewer individuals with more than one million dollars in net worth each were exempt from most of the regulations that bound other investment companies. In late 1993, Meriwether approached several "high net-worth individuals" in an effort to secure start-up capital for Long Term Capital Management. With the help of Merrill Lynch, LTCM secured hundreds of millions of dollars from business owners, celebrities and even private university endowments. The bulk of the money, however, came from companies and individuals connected to the financial industry. By 24 February 1994, the day LTCM began trading, the company had amassed just over $1.01 billion in capital.
Read more about this topic: Long-Term Capital Management
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