A colossal margin call on Archegos is reportedly the major driver behind last Friday’s steep sell-off and the subsequent hits to several global bank balance sheets. Behind the family office is Bill Hwang, a «tiger cub» hedgie that previously pleaded guilty to insider trading.
Archegos Capital Management is believed to be the major seller, according to a «Wall Street Journal» report (behind paywall), offloading an estimated amount of nearly $30 billion in block trades through Goldman Sachs, Morgan Stanley and Deutsche Bank.
Nine stocks dominated most of the selling including Chinese online and entertainment firms Tencent Music, Baidu, GSX, iQiyi Inc. and Vipshop Holdings Ltd.
Some of the individual trades – made during normal trading hours – exceeded $1 billion in value, according to estimates by «Bloomberg».
According to multiple reports, Archegos was forced by banks to sell over $20 billion worth of shares after trading positions moved unfavorably.
Prime brokers demanded more collateral from the family office and then exercised their right to liquidate positions for recovery.
In addition to the aforementioned banks, other financiers involved include Credit Suisse and Nomura – both banks flagged significant impact from an unnamed entity, believed to be Archegos, with the latter claiming a loss of about $2 billion.
Who is Bill Hwang?
In 2001, Hwang established the former Tiger Asia Management which was established following his time as a «tiger cub» – a term to describe the dozen of hedge funds with roots that trace back to renowned hedge fund manager Julian Robertson and the 42-year old Tiger Management.
Tiger Asia grew to be a multi-billion dollar hedge fund and one of the largest investors in Asian financial markets but in 2012, the Securities and Exchange Commission charged Hwang and Tiger Asia with insider trading and manipulation of Chinese stocks. Hwang pleaded guilty, agreed to criminal and civil settlements of over $60 million and later closed the fund.
In 2013, Hwang converted the firm into a family office – Archegos Capital Management – which has reportedly grown to become larger than even many well-known hedge funds.