‘One of the biggest wealth losses of all time’: Bill Hwang, boss of Archegos Capital Management, puts off after collapse
The man at the center of a hedge fund collapse broke his silence after suffering “one of the biggest losses of personal wealth in history.”
Bill Hwang, a multi-billion dollar financier who invested his fortune through his firm Archegos Capital Management, has collapsed after his fund hit rocks last week.
But in the first disclosure the company has made since causing a £ 20bn sale, a spokesperson for Archegos said Hwang, pictured, was going through a ‘rough patch’ and was still trying to ‘figure out the best way forward’.
Fund crisis: Bill Hwang, a multi-billion dollar financier who invested his fortune through his firm Archegos Capital Management, collapsed after his fund hit the ground last week
The comments came as experts tried to contain the losses suffered by Hwang.
Mike Novogratz, a former Goldman Sachs partner who has been investing for nearly three decades, said: ‘When the facts come out I believe Bill Hwang’s explosion will be the most dramatic loss of personal wealth in history. . ”
Bankers and analysts have estimated that the personal fortune of Hwang, a former hedge fund manager known as the “ tiger cub ” because he acquired his credentials from famed Julian Robertson’s Tiger Management, would have may have exceeded £ 7 billion before the collapse last week.
But because he borrowed so much to increase the size of his trades, the sale he caused was much greater.
Rival banks overtaken by Goldman
Goldman Sachs pissed off rival banks after leading the sale of Archegos, which left companies like Credit Suisse and Nomura with heavy losses.
Goldman’s prime broker branch lent heavily to Archegos. The same was true for Credit Suisse, Nomura, UBS, Morgan Stanley and Wells Fargo. When it became clear that some bets on Archegos were turning sour, the banks realized that they would need to sell some of the shares they held for Archegos to recover the money owed.
They held talks that continued late into Thursday on how to proceed in an orderly fashion. Sources said they were close to reaching a deal. But on Friday when markets opened, Goldman sold huge blocks of Hwang stock and prices fell.
The others rushed to follow suit.
Nomura said the incident could wipe out his profits for the past six months, and Credit Suisse estimated the blow to be between £ 2 billion and £ 3 billion.
A source close to one of the banks said: “There was definitely a bit of that ‘I’m fine, Jack’ mentality from Goldman.”
Archegos said: “These are difficult times for the Archegos Capital Management family office, our partners and our employees. All plans are being discussed as Mr. Hwang and the team determine the best way forward.
So-called family offices like Archegos, which manage the money of a very wealthy family, are exempt from making many of the disclosures that normal hedge funds and investment firms are required to make.
This means that the actual size of Hwang’s fortune, and how much has been eroded from it, is unclear.
Archegos fell in trouble last week, after a few stocks he placed big bets on – including US media titans Viacom, CBS and Discovery – fell in value.
Shareholders feared companies were losing ground to new rivals such as Netflix and Disney Plus.
But the situation got out of hand for Archegos. She had borrowed large sums of money from top-notch brokerage services in banks to increase her stake in companies such as Viacom.
This allowed her to purchase more exposure than she could otherwise afford.
But when these blue chip brokers saw Viacom’s stock plummet, they issued a margin call – essentially asking Hwang to give them more money as collateral, to protect them from any loss.
Hwang did not have the cash on hand, which meant he defaulted on his loans from major brokers. This gave them the right to sell the shares they held in his name, to get back the money he owed them.
This caused a sale of around £ 20bn, as blue chip brokers such as Goldman Sachs, Morgan Stanley, Wells Fargo and UBS quickly offloaded Hwang’s shares, causing their prices to fall further. while the market was flooded.
Credit Suisse and Japanese bank Nomura, which were slower to sell, suffered massive losses. JP Morgan analysts estimate losses at all banks due to the crisis could reach £ 7 billion.
Now, regulators around the world are questioning key brokers concerned to see if any of them acted inappropriately.
The UK Financial Conduct Authority and the US Securities and Exchange Commission have requested information from the banks.
While the debacle may be the most financially painful for Hwang, it is not the first scandal he has been involved in.
In 2012, he admitted to a lawsuit in the United States for insider trading and manipulation of Chinese bank shares. He blocked £ 32million in fines and agreed to be kicked out of the industry.
For years after, he was blacklisted by banks including Goldman Sachs who refused to work with him.
Goldman finally gives in, seduced by the lucrative activity represented by Hwang.