Editing Long-Term Capital Management (section)

== Founding ==
[[John Meriwether]] headed [[Salomon Brothers]]' bond arbitrage desk until he resigned in 1991 amid a trading scandal.<ref>{{Harvnb|Dunbar|2000|pp=110–pgs 111–112}}</ref> According to [[Chi-fu Huang]], later a Principal at LTCM, the bond arbitrage group was responsible for 80–100% of Salomon's global total earnings from the late 1980s until the early 1990s.<ref>{{Cite web |title=Chi-Fu Huang: From Theory to Practice |url=http://www.econ.ntu.edu.tw/news/pdf/news1031111.pdf |url-status=dead |archive-url=https://web.archive.org/web/20150923233144/http://www.econ.ntu.edu.tw/news/pdf/news1031111.pdf |archive-date=2015-09-23}}</ref>

In 1993 Meriwether created Long-Term Capital as a hedge fund and recruited several Salomon bond traders; [[Larry Hilibrand]] and [[Victor Haghani]] in particular would wield substantial clout<ref>{{Cite book |title=When Genius Failed |date=2011 |page=55 |quote="While J.M. presided over the firm and Rosenfeld ran it from day to day, Haghani and the slightly senior Hilibrand had the most influence on trading."}}</ref> and two future winners of the Nobel Memorial Prize, [[Myron Scholes]] and [[Robert C. Merton]].<ref>{{Harvnb|Dunbar|2000|pp=114–116}}</ref><ref name="Fortune">{{Harvnb|Loomis|1998}}</ref> Other principals included Eric Rosenfeld, [[Greg Hawkins]], William Krasker, Dick Leahy, James McEntee, Robert Shustak, and [[David W. Mullins Jr.]]

The company consisted of Long-Term Capital Management (LTCM), a [[Delaware]]-incorporated company 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]].<ref>{{Harvnb|Dunbar|2000|pp=125, 130}}</ref>

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Meriwether chose to start a hedge fund to avoid the financial regulation imposed on more traditional investment vehicles, such as [[mutual fund]]s, as established by the [[Investment Company Act of 1940]]&nbsp;– funds which accepted stakes from 100 or fewer individuals each with more than $1 million in net worth were exempt from most of the regulations that bound other investment companies.<ref>{{Harvnb|Dunbar|2000|p=120}}</ref> The bulk of the money raised, in late 1993, came from companies and individuals connected to the financial industry.<ref>{{Harvnb|Dunbar|2000|p=130}}</ref> With the help of Merrill Lynch, LTCM also secured hundreds of millions of dollars from [[high-net-worth individual]] including business owners and celebrities, as well as private [[College and university endowments in the United States|university endowments]] and later the Italian central bank. By 24 February 1994, the day LTCM began trading, the company had amassed just over $1.01 billion in capital.<ref name="Dunbar 2000 142">{{Harvnb|Dunbar|2000|p=142 }}</ref>
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