After the bailout, LTCM continued operations. In the year following the bailout, it earned 10 percent. By early 2000, the fund had been liquidated, and the consortium of banks that financed the bailout had been paid back. But the collapse was devastating for many involved.
Goldman Sachs CEO Jon Corzine, who had been closely involved with LTCM, was forced out in a boardroom coup led by Henry Paulson. Mullins, once considered a possible successor to Alan Greenspan, saw his future with the Federal Reserve dashed. The theories of Merton and Scholes took a public beating. In its annual reports, Merrill Lynch observed that mathematical risk models “may provide a greater sense of security than warranted; therefore, reliance on these models should be limited.”
After helping unwind LTCM, Meriwether launched JWM Partners. Haghani, Hilibrand, Leahy, and Rosenfeld all signed up as principals of the new firm. By December 1999, they had raised $250 million for a fund that would continue many of LTCM’s strategies—this time, using less leverage.
Unfortunately, with the credit crisis, JWM Partners LLC was hit with 44 percent loss from September 2007 through February 2009 in its Relative Value Opportunity II fund. As such, the JWM Hedge Fund was shut down in July 2009.