From his perch high above Midtown Manhattan, just across from Carnegie Hall, Bill Hwang was quietly building one of the world’s greatest fortunes.
Even on Wall Street, few ever noticed him — until suddenly, everyone did.
Hwang and his private investment firm, Archegos Capital Management, are now at the center of one of the biggest margin calls of all time — a multibillion-dollar fiasco involving secretive market bets that were dangerously leveraged and unwound in a blink.
Hwang’s most recent ascent can be pieced together from stocks dumped by banks in recent days — ViacomCBS Inc., Discovery Inc. GSX Techedu Inc., Baidu Inc. — all of which had soared this year, sometimes confounding traders who couldn’t fathom why.
One part of Hwang’s portfolio, which has been traded in blocks since Friday by Goldman Sachs Group Inc., Morgan Stanley and Wells Fargo & Co., was worth almost $40 billion last week. Bankers reckon that Archegos’s net capital — essentially Hwang’s wealth — had reached north of $10 billion. And as disposals keep emerging, estimates of his firm’s total positions keep climbing: tens of billions, $50 billion, even more than $100 billion.
It evaporated in mere days.
“I’ve never seen anything like this — how quiet it was, how concentrated, and how fast it disappeared,” said Mike Novogratz, a career macro investor and former partner at Goldman Sachs who’s been trading since 1994. “This has to be one of the single greatest losses of personal wealth in history.”
Late Monday in New York, Archegos broke days of silence on the episode.
“This is a challenging time for the family office of Archegos Capital Management, our partners and employees,” Karen Kessler, a spokesperson for the firm, said in an emailed statement. “All plans are being discussed as Mr. Hwang and the team determine the best path forward.”
The cascade of trading losses has reverberated from New York to Zurich to Tokyo and beyond, and leaves myriad unanswered questions, including the big one: How could someone take such big risks, facilitated by so many banks, under the noses of regulators the world over?
One part of the answer is that Hwang set up as a family office with limited oversight and then employed financial derivatives to amass big stakes in companies without ever having to disclose them. Another part is that global banks embraced him as a lucrative customer, despite a record of insider trading and attempted market manipulation that drove him out of the hedge fund business a decade ago.
A disciple of hedge-fund legend Julian Robertson, Sung Kook “Bill” Hwang shuttered Tiger Asia Management and Tiger Asia Partners after settling an SEC civil lawsuit in 2012 accusing them of insider trading and manipulating Chinese banks stocks. Hwang and the firms paid $44 million, and he agreed to be barred from the investment advisory industry.
He soon opened Archegos — Greek for “one who leads the way” — and structured it as a family office.
Family offices that exclusively manage one fortune are generally exempt from registering as investment advisers with the U.S. Securities and Exchange Commission. So they don’t have to disclose their owners, executives or how much they manage — rules designed to protect outsiders who invest in a fund. That approach makes sense for small family offices, but if they swell to the size of a hedge fund whale they can still pose risks, this time to outsiders in the broader market.
“This does raise questions about the regulation of family offices once again,” said Tyler Gellasch, a former SEC aide who now runs the Healthy Markets trade group. “The question is if it’s just friends and family why do we care? The answer is that they can have significant market impacts, and the SEC’s regulatory regime even after Dodd-Frank doesn’t clearly reflect that.”
Archegos established trading partnerships with firms including Nomura Holdings Inc., Morgan Stanley, Deutsche Bank AG and Credit Suisse Group AG. For a time after the SEC case, Goldman refused to do business with him on compliance grounds, but relented as rivals profited by meeting his needs.
The full picture of his holdings is still emerging, and it’s not clear what positions derailed, or what hedges he had set up.
One reason is that Hwang never filed a 13F report of his holdings, which every investment manager holding more than $100 million in U.S. equities must fill out at the end of each quarter. That’s because he appears to have structured his trades using total return swaps, essentially putting the positions on the banks’ balance sheets. Swaps also enable investors to add a lot of leverage to a portfolio.
Morgan Stanley and Goldman Sachs, for instance, are listed as the largest holders of GSX Techedu, a Chinese online tutoring company that’s been repeatedly targeted by short sellers. Banks may own shares for a variety of reasons that include hedging swap exposures from trades with their customers.
Goldman increased its position 54% in January, according to regulatory filings. Overall, banks reported holding at least 68% of GSX’s outstanding shares, according to a Bloomberg analysis of filings. Banks held at least 40% of IQIYI Inc, a Chinese video entertainment company, and 29% of ViacomCBS — all of which Archegos had bet on big.
“I’m sure there are a number of really unhappy investors who have bought those names over the last couple of weeks,” and now regret it, Doug Cifu, chief executive officer of electronic-trading firm Virtu Financial Inc., said Monday in an interview on Bloomberg TV. He predicted regulators will examine whether “there should be more transparency and disclosure by a family office.”
Without the need to market his fund to external investors, Hwang’s strategies and performance remained secret from the outside world. Even as his fortune swelled, the 50-something kept a low profile. Despite once working for Robertson’s Tiger Management, he wasn’t well-known on Wall Street or in New York social circles.
Hwang is a trustee of the Fuller Theology Seminary, and co-founder of the Grace and Mercy Foundation, whose mission is to serve the poor and oppressed. The foundation had assets approaching $500 million at the end of 2018, according to its latest filing.
“It’s not all about the money, you know,” he said in a rare interview with a Fuller Institute executive in 2018, in which he spoke about his calling as an investor and his Christian faith. “It’s about the long term, and God certainly has a long-term view.”
His extraordinary run of fortune turned early last week as ViacomCBS Inc. announced a secondary offering of its shares. Its stock price plunged 9% the next day.
The value of other securities believed to be in Archegos’ portfolio based on the positions that were block traded followed.
By Thursday’s close, the value of the portfolio fell 27% — more than enough to wipe out the equity of an investor who market participants estimate was six to eight times levered.
“You have to wonder who else is out there with one of these invisible fortunes,” said Novogratz. “The psychology of all that leverage with no risk management, it’s almost nihilism.”
(Adds comment from Archegos in 8th paragraph.)
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COVID-19: Ottawa adult vaccinations at 69 per cent; Ontario reports 192 new cases – Ottawa Citizen
Ottawa Public Health reported Friday that 69 per cent of adults in the capital are fully vaccinated.
According to the OPH vaccination dashboard, updated Friday morning, 591,639 people aged 18 and over have the two shots.
In all, 83 per cent of the population 12 years and older has received one dose.
Seven new cases of COVID-19 were reported in Ottawa on Friday, bringing the total number of cases since the pandemic began to 27,268.
The death toll remains unchanged at 593.
Ottawa Public Health knows of 41 active cases in the region. However, there are no COVID-19 patients in hospital.
In indicators of interest, the rolling seven-day average of cases per 100,000 residents is 3.9, while the populations per cent positivity in testing is 0.5.
The reproductive number, the average number of people that one infected person will pass on a virus to, is 1.28.
Latest COVID-19 news in Ottawa
Ontario reported 192 new confirmed cases of COVID-19 and one new death on Friday.
While it’s the second week the province’s numbers have been below 200, confirmed cases have climbed significantly from Monday, when 130 new cases were reported.
Currently, there are 137 people in hospital in Ontario, with 136 in ICU due to COVID-related illness and 84 on a ventilator. (Ontario Public Health statistics of ICU hospitalizations and ventilator cases contain some patients who no longer test positive for COVID-19 but who are being treated for conditions caused by the virus.)
There have been 548,986 confirmed cases and 9,308 deaths since the pandemic began.
In health regions in the Ottawa area, Renfrew and District reported three new cases. There were no new cases reported in the Eastern Ontario Health Unit, Kingston or Leeds, Grenville and Lanark units.
Latest COVID-19 news in Quebec
Quebec reported 101 new cases of COVID-19 and one more death Friday morning.
Hospitalizations in the province declined by four patients, for a total of 67. The number of cases in ICU were unchanged at 21.
The province administered 94,624 additional vaccine doses were administered over the previous 24 hours.
Since the beginning of the pandemic, Quebec has reported 376,530 cases and 11,239 deaths linked to COVID-19.
Latest COVID-19 news in Canada
Canada’s Chief Public Health Officer Dr. Theresa Tam reported Friday that 46.7 million doses of vaccine have been administered in Canada, and more than 60 per cent of people over the age of 12 have been fully vaccinated.
Dutch Teen Who Went to Space With Jeff Bezos Told Him He’s Never Bought Anything on Amazon – Gizmodo
The award for “Best Small Talk on a Flight to Space” goes to Oliver Daemen, the 18-year-old from the Netherlands who was part of Blue Origin’s inaugural crewed flight to space earlier this week. On the roughly 10-minute flight, Daemon told Amazon founder Jeff Bezos what probably sounded like blasphemy to his billionaire ears: He had never bought anything on Amazon.
In an interview with Reuters on Friday, Daemen recounted his first flight to space, from when he got the call asking him if he was interested to the conversations he had with his crewmates, which included Bezos, his brother Mark Bezos, and 82-year-old pilot Wally Funk. Daemen, whose father is the CEO of a private equity firm in the Netherlands, became the youngest person to ever fly to space, while Funk became the oldest.
The teen also holds the distinction of surprising Bezos, whose Amazon empire has made him one of the richest men in the world.
“I told Jeff, like, I’ve actually never bought something from Amazon,” Daemen told Reuters. “And he was like, ‘oh, wow, it’s [been] a long time [since] I heard someone say that.’”
Considering that Bezos thanked “every Amazon employee and every Amazon customer” for making the flight possible after he and the crew returned to Earth, Daemen’s comments may have been a little awkward. However, it’s nice (and kind of funny) to hear that someone was frank with him. Bezos no doubt has enough people telling him that Amazon is God’s gift to humanity, so it’s cool to see one of the youths set him straight.
Daemen wasn’t originally supposed to go on the flight with Bezos and crew. He was offered the opportunity after the winner of the online auction for the seat, whose identity is still unknown and who paid a whopping $28 million for it, said they couldn’t go because of “scheduling conflicts.” Daemen, who was a participant in the auction and had already secured a spot on the second flight, was then moved up on the list. His father, Joes Daemen, paid for the seat.
According to Daemen, his family didn’t pay anything near what the mysterious bidder paid for the opportunity.
“We didn’t pay even close to $28 million, but they chose me because I was the youngest and I was also a pilot and I also knew quite a lot about it already,” he said.
The teen, who will begin his studies at Utrecht University in September, said he wasn’t sure what he wanted to do professionally, but would consider focusing on space travel. He also told the outlet that his fellow travelers were “super fun and all down to Earth.” Well, considering Daemen’s referring to a man that wants to stupidly move all polluting industry into space, I’m not sure I’m sold on that.
Congratulations on the award for that great small talk, though.
Several Ontario mass vaccination clinics wind down as focus shifts to smaller sites – CP24 Toronto's Breaking News
The Canadian Press
Published Friday, July 23, 2021 1:37PM EDT
Last Updated Friday, July 23, 2021 1:37PM EDT
Several mass COVID-19 vaccination clinics across Ontario are winding down as first-dose registrations wane and communities shift their focus to smaller venues.
The large clinics held in local arenas, hospitals and recreation centres across the province have been a key part of the vaccine rollout that began in the winter.
Now that first-dose vaccination coverage has hovered at around 80 per cent for adults provincewide, many health units are beginning the transition to smaller, more targeted vaccination approaches.
“Our large-scale clinics are ending because they are no longer filling up,” the Northwestern Health Unit, which covers the city of Kenora, Ont., and surrounding communities, said in a statement this week as its mass clinics wrapped up operations. “Once they are over, we will provide the vaccine in our offices and at smaller clinics in the community.”
Grey Bruce, a current hot spot for the more infectious Delta COVID-19 variant, is also shutting down its mass clinics at the end of the month to return the large sites for community use.
The health unit is advising people with shots booked for August and beyond to reschedule, and is offering smaller clinics across the region that includes several rural areas.
People living in the Wellington-Dufferin-Guelph region were urged this week to seek out their shots before the local health unit starts closing mass clinics the week of Aug. 6.
“I encourage people to take advantage of the thousands of available appointments at our clinics before we move to the next phase,” Rita Isley, director of community health for the region, said in a statement. “These last few weeks of our mass clinics are the easiest way to get your shot.”
The health unit said it will shift to small clinics and pop-ups “into the fall” after the last of the large clinics close on Aug. 20.
Larger cities are also following the trend, with Mississauga, Ont., aiming to close a convention centre used as a vaccination site on Monday, with another hospital clinic closing the next day.
Mayor Bonnie Crombie said the transition away from mass clinics is part of the city’s focus on bringing vaccines to the least-immunized communities, with more emphasis planned on pop-ups, drive-thru clinics and primary care sites.
“This is a good news story and it shows that our mass vaccination clinics have done their job getting the majority of our people vaccinated,” Crombie told reporters on Thursday.
“We can now look at this period as the home stretch of our initial vaccine rollout to get to that final 10 to 20 per cent of our population and ensure that they, too, are vaccinated.”
â€‹Kingston, Ont.’s health unit announced last week that it would enter a “new phase” of its vaccination effort, with plans to shut down mass clinics beginning in August and shift to pharmacy, mobile and primary care sites.
Mass clinics in the London, Ont., will see reduced hours in the coming weeks amid dwindling demand, the health unit announced this week. It said immunizations have sped up and many people have moved up their second-dose appointments that were scheduled for the fall, meaning the large sites won’t be needed.
“As the health unit turns its focus to individuals in the community, the vaccination effort will rely on mobile and walk-in pop-up clinics, as well as providing opportunities to be vaccinated at community events,” the Middlesex-London Heath Unit said in a statement.
Health Minister Christine Elliott said earlier this month that primary care sites would become more essential to the province’s vaccination plan as mass clinics at hospitals, stadiums and other large venues wind down and resume their old uses.
A spokeswoman for Elliott said targeted vaccination strategies will play a greater role going forward as the province aims to reach vaccine hesitant communities.
“The province is working with the public health units to improve vaccination rates through mobile clinics and community-based pop-ups, dedicated clinic days for people with disabilities, holding townhall meetings in multiple languages, and providing services such as transportation, translation services, and drive-through clinics,” Alexandra Hilkene said in a statement on Friday.
The Grey Bruce health unit noted this week that its local COVID-19 situation is now a “pandemic of the unvaccinated,” a trend documented around the world.
The health unit says 95 per cent of cases reported in the first two weeks of July were among people not fully vaccinated, and encouraged people to get their shots, noting that it’s likely that vaccinated people may be subject to fewer restrictions such as isolation rules in the event of future outbreaks.
“Vaccinating the majority of people sets us on the road to return to normal,” it said.
Ontario reported 192 new COVID-19 cases on Friday and one death from the virus. Sixty-six per cent of Ontario adults are now fully vaccinated.
This report by The Canadian Press was first published July 23, 2021.
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