Bear Stearns (fka BSC)

[CITIZEN KEEF]

Founder of fallen hedge fund John Meriwether back in trouble

Siobhan Kennedy

John Meriwether, the man behind one of the world's largest hedge fund collapses in the late Nineties, is struggling to keep investors from bailing out on his latest venture.

Mr Meriwether is best known as a founder of Long Term Capital Management (LTCM), the hedge fund that collapsed in 1998, losing $4 billion and sparking panic across global financial markets.

The debacle led to a Wall Street led bailout and US government hearings on the dangers of hedge funds.

Now Mr Meriwether, who runs JWM Partners LLC, is in trouble again as his largest fund has lost 28 per cent of its value this year and investors are threatening to jump ship.

According to a report in The Wall Street Journal, the investors have until Monday to request withdrawals from his bond fund, but Mr Meriwether and his partners are trying to reassure them that they have reduced their risk exposure and will preserve about $1.4 billion (£700 million) in assets.

Mr Meriwether's problems are the latest to beset large funds invested in mortgage backed securities.

Last month Carlyle Capital Corp (CCC), a $21 billion fund managed and co-owned by Carlyle, the giant US private equity group, collapsed after it failed to meet margin calls from banks.

CCC, like Mr Meriwether's bond fund, was invested in mortgage securities issued by Fannie Mae and Freddie Mac, the two US mortgage agencies whose packages of bonds were seen as among the safest assets because they are tied to the US Government.

Peloton Capital, a London-listed hedge fund, was also wiped out after its investments in mortgage-backed securities tumbled in value.

"We have sharply reduced the risk and balance sheet of the portfolio," Mr. Meriwether told clients in his bond fund, Relative Value Opportunity Fund, in a letter dated March 18.

"While the opportunities are among the best we recall, we continue to balance our need to control risk while attempting to capture the opportunities we feel are available."


http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3631173.ece