MIT Lecture by Former LTCM Partner
Former Long-Term Capital Management (LTCM) partner Eric Rosenfeld gave a guest lecture about LTCM to MBA students at MIT Sloan School of Management in February. The title of the presentation was Long-Term Capital Management: 10 Years Later, What Happened and Lessons Learned. It’s part of an MBA class Options and Futures Markets. MIT TechTV put the video online.
It’s an hour and half long. Regardless what you think of hedge funds and hedge fund managers, the lecture is worth watching. If nothing else, consider that you are getting free education that those MIT MBA students paid a lot of money for.
Looking back at the LTCM story from today, it’s amazing how small it was. I remember when it happened it was a big deal. The news headlines said the world’s financial system nearly melt down because of LTCM. By today’s standard, it was nothing. 14 private banks invested $3.65 billion into LTCM to rescue it. No government money was involved. The Federal Reserve Bank of New York only got the banks into the same room to break a Prisoner’s Dilemma. LTCM’s positions were unwound in about a year. The investor consortium made a profit from their rescue money. 10 years later, the Fed got dumped a boat load of junk assets from Bear Stearns and AIG. A year after Bear Stearn’s collapse, there’s no sign the Fed is able to dispose of those junk assets. They lost billions already in their Maiden Lane enterprises. Compared to Bear Stearns and AIG, LTCM was just a tiny blip.
I hope one day we don’t look back and say how small AIG was.
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