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LTCM returns 11 percent
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December 21, 1998: 4:30 a.m. ET
Hedge fund makes bail-out consortium 11 percent on their $3.6B investment
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LONDON (CNNfn) - The consortium that bailed out sinking hedge fund Long-Term Capital Management in September has made a return of 11 percent on its $3.635 billion injection.
The performance has been so good that the financial institutions that put up the money, including Merrill Lynch and Goldman Sachs, could see some of the their capital returned to them next year, according to London's Financial Times.
The $400 million return covers the period from the end of September to the end of November and is net of management fees.
The fund's strong performance has enabled it to pay down all of a $500 million credit facility led by Chase Manhattan bank that had been due to expire at the end of the year.
The better performance will delight members of the consortium who have made it clear privately that their investment is a short-term measure.
The FT said there had been efforts to sell the portfolio in recent weeks. Preliminary discussions were held between the Saudi investor Prince Alwaleed bin Talal bin Abdulaziz and Goldman Sachs.
LTCM was forced to seek a bail out in September after suffering huge losses in the market turmoil that followed Russia's debt default.
Founded in 1991 by former Salomon Brothers bond guru John Meriwether, LTCM initially specialized in high-volume arbitrage trades between closely linked fixed-income securities.
It ran into trouble by spreading into equities and emerging markets when bond yields declined amid low inflation in most developed countries. 
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