LIPPER HEDGEWORLD

Commentary: My Favorite Hedge Fund: Part II

By Janet Tavakoli
October 24, 2005

Desperate times call for desperate measures. Teetering on the brink of bankruptcy qualifies as one of those times. Although the ownership partners of Long Term Capital Management acted as fiduciaries for outside fund investors, they borrowed US$38 million from the fund to pay the salaries of their own employees. It was contractually allowable, at least according to Roger Lowenstein's book When Genius Failed. The partners worried that if they didn't pay employees, they would quickly lose them, and they were probably right.


EXCERPT

Part One of "My Favorite Hedge Fund" appeared previously.

Janet Tavakoli is the president of Tavakoli Structured Finance, a Chicago-based firm that provides consulting and expert-witness services. Ms. Tavakoli has more than 20 years of experience in senior investment banking positions, trading, structuring and marketing structured financial products. She is a former adjunct professor of derivatives at the University of Chicago's Graduate School of Business, and she has authored a pair of books on the credit markets: Credit Derivatives & Synthetic Structures (John Wiley & Sons, 2nd edition, 2001) and Collateralized Debt Obligations & Structured Finance (John Wiley & Sons, 2003).

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