Bill Hwang is a billionaire who made a huge Fortuna through investments in various business like real estate, Sports teams Yes works of art, among others. A net worth which, according to information from Bloomberg aIt amounted to over $ 20 billion, but is now being lost.
Hwang was the former CEO of Tiger Asia, and he was the man who led family investment fund Capital Management Archives, which triggered a strong sell-off of its shares last Friday, which caused large losses at Credit Suisse, Nomura and possibly Deutsche Bank and Mitsubishi UFJ, forcing a reassessment of the risk of financial derivatives, which were already behind the crisis in Lehman Brothers.
The scandal surrounding 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 that could have to bear the biggest losses in Hwang’s hedge fund operations.
Bank analysts Berenberg estimates that the losses of Swiss credit could exceed $ 3 billion.
In order to Swiss credit, who argued that the losses could be “extremely significant”, would be the second major mistake in its banking investment division after finance. Greensill Bank, which this month went bankrupt due to accounting practices that were compared to those of the electricity company Enron.
Nomura, the Japanese investment bank that took over part of the operations Lehman Brothers after his bankruptcy in 2008, he revealed a loss of 2 billion and on this day his compatriot Mitsubishi UFJ Financial Group said it was affected and estimates the hole left by its exposure to Archers.
According to him Wall Street Journal, Morgan Stanley Yes Goldman Sachs abandoned their commitments to the hedge fund last Friday to limit losses after Archers asks you to liquidate some lost positions.
Morgan Yes Goldman were the fastest to escape their exposure to Archers, while others, such as Deutsche Bank, Wells Fargo and UBS, would have managed to limit losses at the last minute.
Hwang tiger
At the heart of the controversy is the millionaire investor Bill Hwang, a Korean-American who made his fortune after the “Asian tigers” crisis of the 1990s and became a successful investor until he was linked to a “privileged trading” or insider trading complaint when he was manager of Tiger Asia, for which he paid a $ 44 million fine.
Hwang Come back Wall Street with Capital Management Archives, his personal investment arm, which operated in secret due to derivative financial instruments that allowed him to take very large positions in listed companies without having to acquire securities through the mediation of the investment banks concerned, which in turn collected high commissions.
Since last week, the fund has accumulated assets of $ 40 billion, with a net capital of $ 10 billion, mostly in the name of Hwang and his family.
According to some analysts, the positions Archers it could have exceeded $ 50 billion, but most of it evaporated in a matter of days.
According to billionaire and former Goldman Sachs partner Mike Novogratz, the fall of Archegos is something “never seen” due to the “silent, concentrated and rapid disappearance of capital”, in addition to being “the biggest personal loss of wealth in the story” for Hwang and her family.
Under control
“This is a difficult time for the family Capital Management Archives, our partners and employees. Hwang and his team is discussing the best way, “the hedge fund said in a statement on Tuesday night.
Hwang Financial Roller started with the concentration of a very large volume of positions in a limited number of stocks, including ViacomCBS, Discovery or the Chinese GSX Techedu, Baidu or Vipshop Holdings.
With the onset of falls ViacomCBS and other positions at the beginning of last week began to accumulate losses at Archers, which used a type of “swap” derivative known as a CFD, which, through the mediation of a bank, allows positions to be opened on a stock basis without the need to purchase it, with a high leverage and a high risk if the price does not rise .
CFDs or the “Contract for Differences” are traded on the OTC or “over-the-counter” market between institutional investors in an opaque manner. These actors use these contracts because they allow large profits without reserving capital, in addition to the fact that they have certain tax advantages for the United Kingdom.
According to Heritage Capital President Paul Schatz, what happened “is not a surprise”, with markets being artificially supported by the Federal Reserve.
In his view, these derivatives “should not exist today, as they favor a Wall Street” in the Wild West.
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