Investor and former LTCM partner Victor Haghani discusses his early life between the US, Iran and the UK, then his formative years on Salomon Brothers’ fixed-income arbitrage desk. He describes emblematic relative-value trades that combined financing advantages, futures basis and options volatility, and recalls the desk’s ‘Liars Poker’ culture as both entertainment and a way to think about probabilities and restraint.
The interview then turns to Long-Term Capital Management. Haghani outlines how LTCM’s returns outpaced expectations as trades converged quickly, and he walks through an Italian bond strategy designed to harvest carry while reducing credit tail risk through layered hedges. He disputes aspects of the popular When Genius Failed narrative, saying the fund operated by committee and consensus and arguing the book was written too soon and without interviews with partners. On the 1998 crisis, he says LTCM’s direct Russia positions were not the main loss driver; rather, Russia acted as a trigger for a system-wide ‘risk-off’ deleveraging in crowded trades. He alleges large banks also held similar exposures, including claims about Goldman Sachs’ scale and possible Citigroup liquidations.
Haghani offers a personal admission that he over-allocated his own family wealth to LTCM, saying he failed to account for exposure via the management company and his human capital. He explains expected utility as a decision framework for position sizing, arguing individuals should prioritise avoiding ruin and generally avoid leverage, while institutional pools can rationally allocate small slices to leveraged strategies.
Later, he describes moving away from alternative investments, citing tax inefficiency and complexity, towards low-cost indexing and rule-based asset allocation principles that influenced his later work.
Haghani says one plausible driver of the 1998 market dislocation was deleveraging inside large banks, singling out what he calls liquidation within Citigroup’s arbitrage desks. He frames this as a likely catalyst for spreads widening across markets, which then amplified LTCM’s losses.
Read this moment →Victor Haghani, a co-founder of Long-Term Capital Management (LTCM), says he had about 80% of his family’s liquid net worth invested in the fund before its 1998 collapse. He adds he failed to account for additional exposure through ownership of the management company and the extent to which his income potential was tied to LTCM’s continued success.
Read this moment →Discussing the 1998 Russian default, Haghani says LTCM’s direct positions in Russia were limited and were not the main source of losses. He describes Russia as the trigger for a system-wide pullback in balance sheet and risk appetite that widened spreads across the trades LTCM held elsewhere.
Read this moment →Haghani says LTCM’s crisis became systemic because other large firms held similar relative-value positions, leaving the market vulnerable to a broad ‘risk-off’ unwind. He claims Goldman Sachs had exposures several times larger than LTCM in some positions, arguing the episode cannot be explained by hedge fund leverage alone.
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