Author: Julian Marshall
It appears that John Meriwether’s golden touch may have deserted him. Following his tribulations at Long-Term Capital Management investors now have little desire to back his judgement.
Over the past year Meriwether has been seeking to raise $1 billion in funds for his latest venture – the Relative Value Opportunity Fund.
However so far the fund, launched by JWM Partners (Meriwether and five former colleagues from LTCM) with an initial $250 million, has reportedly only pulled in $400 million. JWM launched the fund in December, aiming it at high-net-worth clients with $5 million or more to invest.
This time around, having learnt the lessons from LTCM, Meriwether and his team were only looking to leverage by 12 to 18 times funds. By comparison, LTCM was leveraged 28 times.
LTCM looked good for a time, producing returns in excess of 40% in the first two years, yet in the summer of 1998 it lost 90% of its $4 billion capital.
Despite the more conservative approach, and the fact that Meriwether was prepared to waive the 2% management fee for former LTCM investors until they recouped earlier losses, he has been unable to attract the desired funding.