Bill Hwang is a billionaire who made a huge fortune through investments in various business com real estate, sports equipment i works of art, Others. A net worth that according to information from Bloomberg ait came down to more than $ 20 billion, but that is now lost.
Hwang was the former CEO of Asia Tiger, and he was the man who directed the family investment fund Capital Management Archives, which unleashed a strong liquidation of its shares last Friday, which it provoked numerous losses a Credit Suisse, Nomura and possibly Deutsche Bank and Mitsubishi UFJ, forcing us to re – weigh the risk of financial derivatives, which 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, even though it is the bank Swiss credit which could have to bear the most significant losses from Hwang’s hedge fund operations.
Bank analysts Berenberg estimate that the losses of Swiss credit they could exceed $ 3 million.
per Swiss credit, Who has advanced that losses can be “highly significant”, this would be the second big mistake in its investment banking division after the financial Greensill Bank, Which this month was declared bankrupt by accounting practices that have been compared to those of electricity Enron.
Nomura, The Japanese investment bank that took over part of the operations of Lehman Brothers after its bankruptcy in 2008, it has revealed a loss of 2 billion and this Tuesday its compatriot Mitsubishi UFJ Financial Group he said he has also been affected and is calculating the hole he left his exposure to Archers.
according to the Wall Street Journal, Morgan Stanley i Goldman Sachs got rid of its commitments to the “free investment fund” last Friday to limit losses, after Archers asked to settle some positions at a loss.
Morgan i Goldman they were the fastest to get rid of their exposure to Archers, While others, such as Deutsche Bank, Wells Fargo and UBS, They would have managed to limit last minute losses.
The Hwang tiger
At the heart of the controversy is the millionaire investor Bill Hwang, A Korean-American who made his fortune after the crisis of the “Asian tigers” of the 90’s and became a successful investor until he was linked to a complaint of “insider trading” or insider trading, when he was the manager of Asian tiger, For which he paid a fine of $ 44 million.
Hwang returned to Wall Street with Capital Management Archives, His personal investment arm and which operated in secret thanks to derivative financial instruments that allowed him to adopt very large positions in listed companies without having to acquire the securities through the mediation of the affected investment banks, which in return collected large commissions.
The fund accumulated $ 40 billion in assets until last week, with a net capital of $ 10 billion, most in the name of Hwang and his family.
According to some analysts, the positions of Archers it could have surpassed $ 50 million, but most evaporated in a matter of days.
According to billionaire and ex-partner of Goldman Sachs Mike Novogratz, the fall of Archegos is something “never seen”, for the “quiet, concentrated and rapid disappearance of capital”, in addition to being “the biggest personal loss Wealth of History “by Hwang and his family.
Under the magnifying glass
“This is a difficult time for the family of Capital Management Archives, Our partners and employees. Hwang and his team discuss what the best path is, “the” free investment fund “said Tuesday night in a statement.
Hwang’s financial roller coaster began with the concentration of a very high 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 in ViacomCBS and other positions early last week losses began to accumulate in Archers, Which used a type of “swap” derivative known as CFD, which with the mediation of a bank allows you to open positions based on a stock without having to acquire it, with high leverage and high risk if the price does not rise.
CFDs or “Contract For Differences” are traded in the OTC market or “over-the-counter” between institutional investors in an opaque manner. These actors make use of these contracts because they allow large profits without reserving capital, in addition to having certain tax advantages in the case of the UK.
According to Heritage Capital President Paul Schatz, what has happened “is not a surprise,” with markets artificially sustained with the help of the Federal Reserve.
In his view, these derivatives “should not exist in the present way, as they favor a Wall Street” of the Wild West. ”
MRA