March 27, 2008 / 5:13 AM / 11 years ago

Meriwether hedge fund down 28 pct in 2008-WSJ

NEW YORK, March 27 (Reuters) - The largest hedge fund run by John Meriwether has plunged 28 percent this year, forcing the co-founder of the defunct Long-Term Capital Management to scramble again to stem losses and keep investors from fleeing, the Wall Street Journal said on Thursday.

Losses for the Relative Value Opportunity leveraged bond fund accelerated this month, after the fund had dropped 9.19 percent from Jan 1 to Feb 28. The broader JWM Global Macro fund, also run by Meriwether’s Greenwich, Connecticut firm JWM Partners LLC, was down 6 percent through February, the newspaper said.

Quoting from a March 18 shareholder letter, the newspaper said Meriwether told investors that losing positions have included mortgage securities backed by Fannie Mae FNM.N and Freddie Mac FRE.N, trades tied to municipal bonds, and “triple-A” rated commercial mortgage-backed securities.

The former Salomon Brothers executive is trying to assure investors that his firm will survive tough market conditions and preserve about $1.4 billion of assets, the newspaper said.

“We have sharply reduced the risk and balance sheet of the portfolio,” the letter said.

“While the opportunities are among the best we can recall, we continue to balance our need to control risk while attempting to capture the opportunities we feel are available.”

The Relative Value Opportunity fund had $14.90 in borrowed money for every $1 in equity as of the end of February, the newspaper said.

That’s far below the leverage at Long-Term Capital, whose 1998 implosion led to a rescue by the U.S. Federal Reserve and major investment banks to avert potential systemic problems in the financial system.

JWM has remained in compliance with its lenders, the newspaper said, citing a person familiar with the fund.

Meriwether, through a principal at the firm, declined to comment, the newspaper said. (Reporting by Jonathan Stempel; editing by Kim Coghill)

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