kaal:claim:3405660-006

LTCM was diversified across markets but not across strategy, so its positions failed together; market level diversification does not imply strategy level diversification.

It became obvious that while the fund was diversified in terms of markets, its overall strategy was not diversified.

Kaal, Indirect Regulation of Hedge Funds (2019), II. The Need for Hedge Fund Regulation, p. 6
https://ssrn.com/abstract=3405660 · source PDF

Kaal, Indirect Regulation of Hedge Funds (2019). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3405660

• stress conditions in which risk spreads widen across markets simultaneously

failuresupport: evidencedfailure: illusory diversificationfamily: systemic-risk-transmissionsystemic-riskrisk-and-incentivesprivate-funds

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