The concept of hedge funds is generally described as one of the alternative investment types that institutional and individual investors invest in. In particular, since the 1980s, the widespread use of the internet has increased participation in financial markets and the development of new financial instruments has created new investment opportunities. As a result of these developments, both the number of funds and the amount invested in such funds have increased significantly in recent years. These funds can provide benefits such as protection against the risk of loss, providing high returns by assuming low risk and diversification to their investors with various investment strategies. In addition, they can make financial markets more efficient and stable through price determination mechanisms, arbitrage activities and increasing liquidity. However, these funds can also be quite risky due to their high leverage. Negative movements in market indicators can reduce the value of fund assets. In addition, the financial failure of large hedge funds in particular can have the potential for instability in the financial markets in general. Long Term Capital Management (LTCM), a highly leveraged hedge fund in the sector, failed in 1998 due to the combined pressures of the 1997 Asian and 1998 Russian financial crises as well as the excessive risks it assumed. The LTCM example demonstrates that the risks of highly leveraged funds must be managed well. In this context, the study primarily defines the concept of hedge funds, their strategies, benefits and costs. Then, the LTCM financial failure example experienced in practice is examined. In the conclusion, a general evaluation is made within the framework of the LTCM case study.