‘One of the biggest capital losses ever’: Archegos Capital Management boss Bill Hwang cries after a meltdown
The man in the midst of a hedge fund collapse has broken his silence after suffering “ one of the greatest losses in personal wealth in history. ”
Bill Hwang, a multi-billionaire financier who invested his assets through his firm Archegos Capital Management, took to the ground after his fund crashed last week.
But in the first disclosure the company has made since causing a £ 20 billion sale, an Archegos spokesman said that, in the photo, Hwang was having a ‘challenging time’ and was still trying to ‘determine the best way forward. ‘.
Fund crisis: Bill Hwang, a multi-billionaire financier who invested his assets through his firm Archegos Capital Management, went down after his fund crashed last week
The comments came as experts tried to come to grips with the losses Hwang has suffered.
Mike Novogratz, a former Goldman Sachs partner who has been investing for nearly three decades, said, “When the facts come to light, I believe Bill Hwang’s eruption will be the most spectacular personal loss of wealth in history. ‘
Bankers and analysts have estimated that the personal fortune of Hwang, a former hedge fund manager known as a ‘Tiger cub’ for earning his credentials with renowned Julian Robertson’s Tiger Management, could have exceeded £ 7 billion before the previous collapse. week.
But because he borrowed so much to increase the size of his trades, the selloff he caused was much greater.
Rival banks caught by Goldman
Goldman Sachs has tricked rival banks after leading the sell-off of Archegos, causing heavy losses to Credit Suisse and Nomura, among others.
Goldman’s prime broker arm lent heavily to Archegos. Just like Credit Suisse, Nomura, UBS, Morgan Stanley and Wells Fargo. When it became clear that some bets on Archegos were turning sour, the banks realized they had to sell some of the shares they held for Archegos in order to get the money owed back.
They held talks about how to do it in an orderly manner until late Thursday. Sources said they were about to reach an agreement. But on Friday, when the markets opened, Goldman sold huge blocks of Hwang’s stock and prices fell.
The rest rushed to follow his example.
Nomura has said the incident could wipe out gains from the past six months, and Credit Suisse estimated the hit to be between £ 2bn and £ 3bn.
A source close to one of the banks said, “There was definitely a bit of that” I’m okay, Jack “mentality from Goldman.”
Archegos said, “This is a challenging time for Archegos Capital Management’s family office, our partners and employees. All plans are discussed while Mr. Hwang and the team determine the best way forward. ‘
So-called family offices such as Archegos, which manage the money of a very wealthy family, are exempt from many of the disclosures to which normal hedge funds and investment firms have been made.
This means that the true size of Hwang’s fortune, and how much of it has been eroded, is unclear.
Archegos ran into trouble last week after a few stocks on which it had placed big bets – including US media titans Viacom, CBS and Discovery – fell in value.
Shareholders feared the companies were losing ground to newer rivals such as Netflix and Disney Plus.
But the situation got out of hand for Archegos. It had borrowed large amounts of money from the prime brokerage arm of banks to increase its stake in firms such as Viacom.
This allowed it to buy greater exposure than it could otherwise afford.
But when those prime brokers saw Viacom stock fall, they issued a margin call – essentially asking Hwang to give them more money as collateral, to protect them from any losses.
Hwang did not have the money to hand, which meant he was unable to honor his loans with the prime brokers. This gave them the right to sell the shares they had for him in order to get back the money he owed them.
It caused a sell-off of around £ 20 billion as prime brokers, including Goldman Sachs, Morgan Stanley, Wells Fargo and UBS, quickly discharged Hwang’s shares, further plummeting their price as the market flooded.
Credit Suisse and Japanese bank Nomura, which were slower to sell, have suffered massive losses. JP Morgan analysts estimate that losses for all banks from the crisis could amount to £ 7 billion.
Now regulators around the world are questioning the major brokers involved to see if they have acted inappropriately.
The UK Financial Conduct Authority and the US Securities and Exchange Commission have asked the banks for information.
While the debacle is most painful for Hwang financially, it is not the first scandal he has been involved in.
In 2012, he admitted in a US lawsuit that he admitted to insider trading and manipulation of Chinese bank stocks. He imposed £ 32 million in fines and agreed to be banned from the industry.
Years later, he was blacklisted by banks, including Goldman Sachs, who refused to work with him.
Goldman eventually gave in, seduced by the lucrative company Hwang represented.