More Firms Blame Emerging Markets for Losses

Long-Term Capital Management Inc., the hedge fund run by former Salomon Inc. Vice Chairman John Meriwether, said Wednesday that it lost 44% of its net assets in August, and blamed emerging markets for 16% of the loss and Russia for 10%.

Chase Manhattan Corp. and Donaldson, Lufkin & Jenrette Inc. also joined the list of banks and investment houses issuing warnings that turmoil in Russia and other markets has hurt results.

Chase, the largest U.S. bank, said it expects a third-quarter charge of $200 million against earnings, and DLJ, Wall Street’s largest underwriter of high-yield bonds, said it lost an unspecified amount as Russia’s bond default and currency devaluation helped spark trading losses.

Chase said revenue from trading currencies, bonds and other securities in July and August was about $160 million, dragged down as it lost money in Russia.

DLJ said it earned $40 million before taxes so far this quarter. It earned $120.3 million after taxes in the year-earlier quarter.

Greenwich, Conn.-based Long-Term Capital Management said net assets have fallen 52% so far this year as stock and bond arbitrage--trades designed to take advantage of price discrepancies between related securities--went wrong. It still has more than $2.3 billion in assets and is seeking more from investors.

Investments by Meriwether and his partners, including Nobel laureates Myron Scholes and Robert Merton as well as former top Salomon traders, total more than one-third of the fund.

“August has been very painful for all of us,” Meriwether said in a letter to investors.

The firm said 82% of the August losses came from arbitrage, primarily in government bonds of the Group of Seven countries. The rest came from betting securities would rise or fall. Losses also involved emerging-market debt and “equity-related instruments.”

Chase’s expected charge mostly covers losses in Russia and Asia. In the second quarter, the bank’s total charge-off was $82 million. Russian credit exposure was about $250 million as of Aug. 31, including $50 million in securities, $140 million related to commercial banking and $60 million in ruble-denominated inter-bank deposits, Chase said.

DLJ, a unit of insurer Equitable Cos., said its results were hurt by “turmoil in Russia.” DLJ also said it had no equity gains during the global market slump. Axa Group, France’s largest insurer, controls 61% of Equitable.