The Return of Long-Term Capital Management?

Not to be outdone, Bo Collins -- the founder of hedge fund MotherRock, who also slipped up on natural gas bets -- is putting together an investment vehicle of his own, according to reports.

Even former execs at Refco, which went down two years ago amid allegations that CEO Phil Bennett had hidden millions of dollars in losses, are finding new digs. Dennis A. Klejna, Refco's one-time general counsel, has turned up at U.K. hedge fund Man Financial as its senior vice president and chief compliance counsel.

With all the cash being thrown at private equity firms and hedge funds, investors almost seem to be saying, "the bigger the blowup, the better."

Created hard-to-parse special purpose entities and named them after characters from George Lucas' Star Wars trilogy? That just means you're an innovator.

This trend bodes well for David Lee, who is tied to BMO Financial's (BMO Quote - Cramer on BMO - Stock Picks) natural gas crisis, where the Toronto-based bank reported that it could post losses of $315 million or worse.

Although collapses of late haven't fed widespread calamity, market participants are still wary of an eventual overarching crisis.

"The abuses that we have seen with Amaranth and LTCM could occur again," says Steven Weddle, director of alternative investments at ING Investment Management in New York, "if effective risk management is not used throughout the entire investment process."

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