John Meriwether Back in the News, For All of the Wrong Reasons

A John Meriwether fund is in trouble again.

John Meriwether doesn't ring a bell?

He was the man behind Long Term Capital Management (LTCM), the "perfectly" run hedge fund that collapsed in 1998, sending shivers through the global financial markets. Four billion dollars in total was lost, global financial markets were temporarily unhinged and many people lost a lot of money, either directly or indirectly as global markets plunged. Wall Street had to ride to the rescue and bail the company out before any more damage was done, and Meriwether was left with plenty of egg on his face and significantly emptier pockets.

Anyways, he came back with a new company, JWM Partners LLC. According to the Wall Street Journal, the largest fund in this company has dropped 28% on the year and investors are threatening that they want to pull out their capital.

A 28% drop may not seem catastrophic at first glance, but in the world of hedge funds it is very tough to claw back from such a loss, especially in a fund that trumpets low-risk gains. A 28% drop in a bond fund? Try soothing your shareholders nerves after reporting a three month loss like that - it's not easy.

According to the WSJ, Meriweather and others at the firm are trying to reassure their investors that they have reduced their risk exposure. It probably won't work, especially in this day and age when hedge funds are going belly-up overnight. I would imagine that most investors will want their money out, especially given the fact that Meriwether was associated with LTCM (he was the founder).

JWM Partners is another fund that invested in mortgage securities and got burnt.

Should be interesting to see how this story plays out.

Filed under: Hedge Fund News | The Economic Meltdown