Wall Street on Tuesday may be seeing quiet action, but investors were still raving about the highly leveraged wrong bet that Bill Hwang’s Archegos Capital Management allegedly employed, which may have charged many banks with multi-million dollar losses. Using derivatives, Archegos, pronounced “Ar-chee-gos” by the company, held positions in stocks such as ViacomCBS Inc. VIAC, + 5.43%, Discovery Inc. DISCA, + 8.78%, and GSX Techedu GSX, + 8.48%, and he was hit by margin calls when the management of those high-flying flights turned against the family office.
The slowdown in stocks, with ViacomCBS and Discovery stocks posting their worst slowdowns on record, forced the banks that loaned Archegos the money to run complex derivatives trading to ask the fund to put in more money or cancel bets. Losses at Archegos have led to the liquidation of massive stock positions worth more than $ 30 billion, called block deals, the Wall Street Journal wrote. Some, however, say that Hwang’s fund’s exposures to financial markets approached $ 100 billion. Bloomberg News quoted a Wall Street veteran, Michael Novogratz at Galaxy Digital and a former hedge fund manager, who offered this absolute assessment of Archegos’ losses: “I’ve never seen anything like this: how quiet I was, how focused , and how quickly it disappeared, “he said.” This has to be one of the biggest losses of personal wealth in history, “Novogratz said. A call to Hwang at Archegos’ New York offices was not immediately returned, but the investment company issued a comment through a spokeswoman. “This is a challenging time for the Archegos Capital Management family office, our partners and employees. All plans are being discussed while Mr. Hwang and the team determine the best way forward. ”The Archegos liquidation may also have affected Credit Suisse Group AG and Nomura Holdings Inc., which said they could incur substantial losses related to the business. to recent market turmoil without specifically naming the fund. The Wall Street Journal reported that Mitsubishi UFJ Financial Group Inc.’s securities business also said it could lose $ 300 million from its exposure to a US client, also without naming the entity behind the losses. On Tuesday, the Dow Jones Industrial Average DJIA, -0.36%, the S&P 500 SPX Index, -0.40%, and the Nasdaq Composite Index COMP, -0.27% traded modestly lower and Discovery shares and ViacomCBS rose sharply. It’s unclear how much money Hwang will lose as his fund reportedly managed about $ 10 billion, a fraction of his reported equity exposures. Hwang was a disciple of the legendary investor Julian Robertson, who ran Tiger Management and whose students are known as Tiger Cubs. In 2012, Hwang turned Tiger Asia, which he founded in 2001, into his family office, renamed it Archegos and changed its structure to a family office. The change came after Tiger Asia pleaded guilty to one count of fraud and agreed to pay $ 44 million to settle civil allegations by U.S. securities regulators. Chinese banks, WSJ reported at the time.