Will the third time be the charm? Ten years after John Meriwether almost vaporised the global financial system with Long Term Capital Management, he was just another victim last autumn when his new firm, JWM Partners, was crippled. But the news that he already is launching another venture raises questions about investors’ short memories. Faith in mathematically elegant, supposedly low-risk strategies has hardly been tempered by two financial crises only a decade apart that turned exploiting small inefficiencies with borrowed money into big problems.

JWM used less leverage than LTCM and its flameout was correspondingly more modest – a 44 per cent loss in the year ended this February. The returns before 2008 were less stellar, too, though still handsome. But the devastating maths of big losses and the drag of fees mean that gains must be excellent indeed to justify investing in a strategy with a penchant for blowing up. Consider two hypothetical investors burnt by LTCM asked to put their cash into JWM in 1999. One decides to trust Mr Meriwether again while the other becomes risk-averse and invests in Treasuries yielding 5 per cent. With typical hedge fund fees of “two and 20” percentages of assets and returns, respectively, JWM would have needed to earn 17 per cent a year to match ultra-safe bonds once its final loss is taken into account. Reports not confirmed by Meriwether said JWM earned just 1.5 per cent annually from inception.