The investment fund for wealthy investors, run by former Salomon Brothers bond trading whiz John Meriwether, took close to $4 billion in losses during this summer's financial turmoil. A group of 14 leading banks and brokerages in September shelled out $3.6 billion to rescue Long-Term and prevent their loans to the fund going sour.

The group, which received a 90 per cent equity stake in the fund for its investment, now stands to benefit handsomely, said banking analyst David Berry of Keefe Bruyette & Woods in a research note Tuesday. For example, JP Morgan & Co Inc.

The change in Long-Term's fortunes, which was confirmed by a source close to the fund, shows how fast money is made and lost in the largely unregulated hedge fund world.

Long-Term, using computer-generated tradingstrategies, mostly exploited price discrepancies between similar bonds traded on different markets. Over the turbulent summer, investors dumped all bonds they perceived as too risky and massively bought U.S. Treasuries. Yield spreads between Treasuries and all other bonds started to increase, and Long-term bet heavily that they would tighten again.

When Russia basically defaulted on its loans in August, however, spreads widened even further, far beyond what even the Nobel Price laureates on Long-Term's staff had expected. The fund first unsuccessfully tried to raise more money to maintain its trading positions, but later had to throw in the towel and allow its lenders to take over.

In recent months, however, global debt markets have calmed as the US Federal Reserve and European central banks have cut interest rates. Spreads have started to tighten again and Long-Term's positions are starting to pay off.

It is unclear how much the fund has earned since the banks rescued it in early September. Long-Term'spositions first declined but now are solidly in the plus, sources have told Reuters. Spokesmen for Long-Term declined to comment on the fund's finances.