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LTCM founder Meriwether has new hedge fund -sources

NEW YORK, Dec 15 (Reuters) - John Meriwether, founder of the hedge fund Long-Term Capital Management LP that shook financial markets with its near-collapse last year, launched a new fund on Wednesday, said people familiar with the launch.

Meriwether, a former bond trading chief at Salomon Brothers, launched the Relative Value Opportunity Fund I with $250 million, said people dealing with the fund. The new fund, open to wealthy individuals and institutional investors, will make the same sort of bond market investments that were the staple of LTCM's style.

Investors who heard presentations made by Meriwether in the last few months said the new fund will not rely as heavily on borrowed money as LTCM did. LTCM's investments at times were over 120 percent of its capital, and the fund nearly went under when it had to meet payments on the loans after its investments in Russia and other emerging market debt lost value during the global financial crisis.

A spokesman for Merriwether declined to comment on the new fund.

Long-Term Capital has returned most of the $3.625 billion of funds provided by 14 banks in a bail-out last year. The Federal Reserve Bank of New York helped organize the rescue along with other bank regulators to avert a breakdown of global financial markets, where LTCM was wreaking havoc as it sold off billions of dollars worth of assets to meet payments on loans from several global financial institutions.

LTCM invested primarily in bonds that offered a higher return than U.S. Treasuries. When Russia defaulted on debt in August, 1998, most bond markets around the world nose-dived, with investors seeking the refuge of U.S. Treasuries. That turned into huge losses for LTCM.