Who's Bill Hwang, the man behind Archegos Capital?

Updated : March 31, 2021 05:37 PM IST

In 2012, he pleaded guilty to insider trading of Chinese bank stocks and paid $44 million to settle the lawsuit.

He also has a charity that has $500 million in assets.

A little-known family office, Archegos Capital Management, was forced into a fire sale—selling assets at a very low price—of shares worth around $20 billion last Friday (March 26) following its inability to meet margin obligations to brokers.

The led to prices of stocks like ViacomCBS, Discovery crashing over 25 percent intra-day, and US-listed shares of China-based Baidu and Tencent Music plunging 33-48 percent.

Who is the owner of Archegos Capital Management?

Archegos Capital Management, a family investment vehicle, was founded by former Tiger Management analyst Bill Hwang in 2013. He was a protege and one of the "tiger cubs" of legendary hedge fund manager Julian Robertson.

Hwang started out as a stock salesman at Hyundai Securities in the early 1990s. He went on to build Tiger Asia Management, a New York-based hedge fund focussing on Asian investments.

In 2012, the United States’ Securities and Exchange Commission (SEC) accused him of insider trading of Chinese bank stocks. The agency alleged that he used confidential information received in private placement offerings to short sell three Chinese bank stocks.

Short selling is a strategy, in which an investor sells borrowed shares with an intention of buying them back at a lower price in future.

Hwang pleaded guilty to the charges and agreed to pay $44 million, besides agreeing to be barred from the investment advisory industry. After the settlement of the civil lawsuit, Hwang closed Tiger Asia Management and Tiger Asia Partners and went on to open Archegos soon after.

The name is derived from a Greek biblical word meaning leader or prince.

What was the firm’s undoing?

Archegos held large and leveraged bets in the US media stocks, ViacomCBS and Discovery, as well as a few Chinese internet ADRs like Baidu, Tencent and Vipshop. Some of the positions were held via total return swaps, a type of derivative that allows investors to take big, levered stakes without disclosing those positions publicly.

Bankers reckon that Archegos's net capital, essentially Hwang's wealth, had reached over $10 billion.

But these bets started going south after ViacomCBS’ $3 billion stock offering through Morgan Stanley and JPMorgan earlier in last week fell apart. It triggered a domino effect where prime brokers rushed to exit the positions on Archegos’ behalf and resulted in a massive margin call.

In a margin call, brokerages demand that an investor deposit additional money or securities into the account when a position falls sharply in value.

Nomura, a major broker for Archegos, on Monday (March 29) warned of a "significant loss" estimated at $2 billion from the unwind of the trades. Credit Suisse said the loss resulting from this exit could be “highly significant and material” to its first-quarter results.

A spokesperson for Archegos told CNBC late on Monday that this is a challenging time for the family office of the capital management firm, "our partners and employees." "All plans are being discussed," said the spokesperson Karen Kessler.

Bloomberg says the full picture of his holdings, however, is still emerging.

One of the reasons is that Hwang never filed a 13F report of his holdings. The report is mandatory for every investment manager holding more than $100 million in the US equity market, at the end of each quarter.

How does Hwang’s charity coke into the picture?

A generous tax write-off for Hwang’s investments is taken care of by his charity, "The Grace and Mercy Foundation", which has $500 million in assets, according to the latest tax filings, spotted by CNBC’s Robert Frank.

Hwang donated a $20 million gain in Amazon stock this year, allowing him to avoid the capital gains tax and get a tax deduction as well.

The foundation, however, has managed to maintain a low profile, even as it donated $16 million this year to Korean Christian causes.

Besides being the co-founder of the Grace and Mercy Foundation, whose mission is to “serve the poor and oppressed”, Hwang is also a trustee of Fuller Theology Seminary.

Published : March 31, 2021 05:37 PM IST

Who's Bill Hwang, the man behind Archegos Capital?

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