Hilibrand also shorted Berkshire Hathaway, the holding company run by Warren Buffett, believing that Berkshire was overpriced relative to its individual parts.
But since many of Berkshire's assets were private, Hilihrand couldn't buy the parts, making it a poorly conceived arbitrage. Though usually coldly calculating, Hilibrand was being a bit too clever-trying to profit at the billionaire's expense and dangerously moving the fund afield of its expertise.
This was plainly unwise.
Even on well-conceived trades, the partners had lost all sense of scale.
In one trade that would lose them money, LongTerm bought a huge 15 percent share, worth $480 million, of a junkbond issue from Starwood Hotels & Resorts, a real estate operator that itself had a tendency to overreach.