Editing Long-Term Capital Management (section)

===Riskier investments starting in 1997===

LTCM's profit percentage for 1996 was 40%.  However, for 1997, it was "only" 17%, which was actually right at average for hedge funds.  A big reason was that other companies were by now following LTCM's example; greater competition left fewer arbitrage opportunities for LTCM themselves.<ref name="Too Interconnected to Fail?"/>

As a result, LTCM began investing in emerging-market debt and foreign currencies.  Some of the major partners, particularly Myron Scholes, had their doubts about these new investments.  For example, when LTCM took a major position in the [[Norwegian krone]], Scholes warned that they had no "informational advantage" in this area.<ref name="Too Interconnected to Fail?"/>

In June 1998 – which was before the Russian financial crisis – LTCM posted a 10% loss, which was their biggest monthly loss to date.<ref name="Too Interconnected to Fail?"/>