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Case | HBS Case Collection | November 1999

Long-Term Capital Management, L.P. (C)

by Andre F. Perold

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Abstract

Long-Term Capital Management, L.P. (LTCM) was in the business of engaging in trading strategies to exploit market pricing discrepancies. Because the firm employed strategies designed to make money over long horizons--from six months to two years or more--it adopted a long--term financing structure designed to allow it to withstand short-term market fluctuations. In many of its trades, the firm was in effect a seller of liquidity. LTCM generally sought to hedge the risk--exposure components of its positions that were not expected to add incremental value to portfolio performance and to increase the value-added component of its risk exposures by borrowing to increase the size of its positions. The fund's positions were diversified across many markets. This case is set in late August 1998. LTCM's fund was down nearly 40% since the beginning of 1998, with most of this loss having occurred in recent weeks. LTCM was evaluating the fund's liquidity and considering alternative courses of action. Possible choices included attempting a rapid reduction of many of the fund's positions and trying to raise additional capital.

Keywords: Fluctuation; Capital; Financial Liquidity; Financing and Loans; Investment Funds; Investment Portfolio; Corporate Governance; Governing Rules, Regulations, and Reforms; Management; Risk Management; Markets; Motivation and Incentives; Financial Services Industry;

Format: Print 13 pages EducatorsPurchase

Citation:

Perold, Andre F. "Long-Term Capital Management, L.P. (C)." Harvard Business School Case 200-009, November 1999.

Related Work

  1. Case | HBS Case Collection | October 1999 (Revised October 2004)

    Long-Term Capital Management, L.P. (D)

    Andre F. Perold

    Supplements the (C) case.

    Keywords: Financial Services Industry;

    Citation:

    Perold, Andre F. "Long-Term Capital Management, L.P. (D)." Harvard Business School Case 200-010, October 1999. (Revised October 2004.)  View Details
    CiteView DetailsEducatorsPurchase Related

About the Author

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Andre F. Perold
George Gund Professor of Finance and Banking, Emeritus

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More from the Author

  • Case | HBS Case Collection | November 2006 (Revised November 2017)

    Kerr-McGee

    Robin Greenwood and André Perold

    Activist investors Carl Icahn and Barry Rosenstein acquire a stake in Oklahoma-based company Kerr-McGee. They demand two board seats and ask the company to make several operational and financial changes, including the repurchase of equity and divestiture of their chemicals business. The case protagonist, Luke Corbett, CEO, opposes these changes.

    Keywords: Restructuring; Chemicals; Equity; Investment; Governance Controls; Managerial Roles; Chemical Industry; Energy Industry; United States;

    Citation:

    Greenwood, Robin, and André Perold. "Kerr-McGee." Harvard Business School Case 207-020, November 2006. (Revised November 2017.)  View Details
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  • Case | HBS Case Collection | July 2013 (Revised June 2014)

    Oceanbulk Maritime S.A.

    Andre F. Perold

    Citation:

    Perold, Andre F. "Oceanbulk Maritime S.A." Harvard Business School Case 914-403, July 2013. (Revised June 2014.)  View Details
    CiteView DetailsEducatorsPurchase Related
  • Supplement | HBS Case Collection | April 2014

    Oceanbulk Maritime S.A. (B)

    Andre F. Perold

    Citation:

    Perold, Andre F. "Oceanbulk Maritime S.A. (B)." Harvard Business School Supplement 914-416, April 2014.  View Details
    CiteView DetailsPurchase Related
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