Bill Hwang he is a billionaire who has made a huge one fortuna through investments in various business like real estate Sports teams Y works of art, among other things. A net worth that, according to information from Bloomberg aIt amounted to more than $ 20 billion, but that is now lost.
Hwang was the former CEO of Tiger Asia, and he was the man who made the family investment fund Archegos Capital Management which triggered a strong sell-off in its shares last Friday, which caused big losses Credit Suisse, Nomura and possibly Deutsche Bank and Mitsubishi UFJ, to rethink the risk of derivative financial products that were already behind the crisis Lehman Brothers.
The scandal over the liquidation of the Archegos fund continues to spread among investment banks in New York, Tokyo and Zurich, although it is the bank Swiss credit the one who could potentially bear the greatest losses from Hwang’s hedge fund business.
Bank analysts Berenberg estimate that the losses of Swiss credit could be more than $ 3 billion.
To so Swiss credit, which has argued that the losses could be ‘very significant’, this could be the second major mistake in its investment banking division after that of financial Greensill Bank, which went bankrupt this month due to accounting practices compared to that of the electricity company Enron
Nomura, the Japanese investment bank operating some of the operations of Lehman Brothers after his bankruptcy in 2008 he announced a loss of 2 billion and this Tuesday his fellow countryman Mitsubishi UFJ Financial Group said it has also been compromised and estimates the hole left by its exposure to it Archegos
According to him Wall Street Journal Morgan Stanley Y Goldman Sachs they ditched their commitments to the hedge fund last Friday to limit losses thereafter Archegos ask to liquidate some losing positions.
Morgan Y Goldman were the fastest to get rid of their exposure to it Archegos, while others, such as Deutsche Bank, Wells Fargo and UBS, they would have managed to cut losses at the last minute.
The Hwang tiger
At the center of the controversy is the millionaire investor Bill Hwang, a Korean-American who made his fortune following the ‘Asian Tigers’ crisis of the 1990s and became a successful investor until he was linked to a complaint of “ insider trading ” or insider trading when he was the manager from Tiger Asia, for which he paid a $ 44 million fine.
Hwang Return to Wall Street with Archegos Capital Management, his personal investment arm, operating in secret thanks to derivative financial instruments that allowed him to take very large positions in listed companies without having to acquire the securities through the intermediary of the relevant investment banks, which in return collected high commissions .
As of last week, the fund has amassed $ 40 billion in assets, with a net capital of $ 10 billion, most of it in the name of Hwang and his family.
According to some analysts, the views are of Archegos it could have been more than $ 50 billion, but most of it evaporated within a few days.
In the view of billionaire and former Goldman Sachs partner Mike Novogratz, Archegos’ fall is something ‘never seen’, due to the ‘quiet, concentrated and rapid disappearance of capital’ in addition to ‘the greatest personal loss of wealth in the story’ for Hwang and her family.
A closer look
“This is a difficult time for the family from Archegos Capital Management, our partners and employees. Hwang and his team are discussing the best way, ”the hedge fund explained in a statement Tuesday evening.
Hwang’s financial rollercoaster started with the concentration of a very large number of positions in a limited number of stocks, including ViacomCBS, Discovery from GSX Techedu, Baidu or Vipshop Holdings.
With the start of the falls ViacomCBS and other positions early last week, losses started to pile up Archegos, which used a type of “swap” derivative known as CFD, which, with the intervention of a bank, allows to open positions based on a stock without having to acquire it, with high leverage and high risk as the price does not rise.
CFDs or “Contract For Differences” are traded on the OTC or “over-the-counter” market between institutional investors in an opaque manner. These actors make use of these contracts because they allow for large profits without capital reservation, in addition to certain tax benefits in the case of the UK.
According to Heritage Capital Chairman Paul Schatz, what has happened is “no surprise,” with markets being artificially supported with the help of the Federal Reserve.
According to him, these derivatives should “not exist in the current way, as they prefer a Wall Street” of the Wild West.
MRA