Roger Lowenstein
8 key ideas, each explained in our own words.
When Genius Failed
- IDEA 1
Brilliant minds built a hedge fund
Lowenstein tells the story of Long-Term Capital Management, a hedge fund founded in 1994 by John Meriwether and staffed by star traders and Nobel Prize-winning economists. Investors believed its mathematical models could make steady profits with little risk.
- IDEA 2
Models promised safety
The fund used models to find small price differences between related assets. Its partners believed these trades were nearly risk-free. In Lowenstein's account, the partners were very clever, and they trusted the maths to tell them when a trade was safe.
- IDEA 3
Profits came early
LTCM earned spectacular returns in its first years. Its success attracted huge investments. In Lowenstein's account, the early success made the partners and investors confident that the method would keep working. This made the fund look unbeatable.
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