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One of World’s Greatest Hidden Fortunes Is Wiped Out in Days – Yahoo Canada Finance

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(Bloomberg) —

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.”

Valuable Customer

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.

‘Unhappy Investors’

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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CANADA STOCKS – TSX falls 0.14% to 19,201.28

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* The Toronto Stock Exchange’s TSX falls 0.14 percent to 19,201.28

* Leading the index were Stantec Inc <STN.TO​>, up 3.4%, Imperial Oil Ltd​, up 3.3%, and Corus Entertainment Inc​, higher by 2.9%.

* Lagging shares were Aphria Inc​​, down 14.2%, Village Farms International Inc​, down 9.9%, and Aurora Cannabis Inc​, lower by 9.4%.

* On the TSX 91 issues rose and 134 fell as a 0.7-to-1 ratio favored decliners. There were 24 new highs and no new lows, with total volume of 228.0 million shares.

* The most heavily traded shares by volume were Toronto-dominion Bank, Royal Bank Of Canada and Suncor Energy Inc.

* The TSX’s energy group fell 0.32 points, or 0.3%, while the financials sector climbed 2.46 points, or 0.7%.

* West Texas Intermediate crude futures rose 0.52%, or $0.31, to $59.63 a barrel. Brent crude  rose 0.4%, or $0.25, to $63.2 [O/R]

* The TSX is up 10.1% for the year.

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Air Canada signs C$5.9 billion government aid package, agrees to buy Airbus, Boeing jets

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By David Ljunggren and Allison Lampert

OTTAWA/MONTREAL (Reuters) -Air Canada, struggling with a collapse in traffic due to the COVID-19 pandemic, reached a deal on Monday on a long-awaited aid package with the federal government that would allow it to access up to C$5.9 billion ($4.69 billion) in funds.

The agreement – the largest individual coronavirus-related loan that Ottawa has arranged with a company – was announced after the airline industry criticized Prime Minister Justin Trudeau’s Liberal government for dawdling. The United States and France acted much more quickly to help major carriers.

Canada‘s largest carrier, which last year cut over half its workforce, or 20,000 jobs, and other airlines have been negotiating with the government for months on a coronavirus aid package.

In February, Air Canada reported a net loss for 2020 of C$4.65 billion, compared with a 2019 profit of C$1.48 billion.

As part of the deal, Air Canada agreed to ban share buybacks and dividends, cap annual compensation for senior executives at C$1 million a year and preserve jobs at the current level, which is 14,859.

It will also proceed with planned purchases of 33 Airbus SE 220 airliners and 40 Boeing Co 737 MAX airliners.

Chris Murray, managing director, equity research at ATB Capital Markets, said the deal took into account the “specific needs of Air Canada in the short and medium term without being overly onerous.”

He added: “It gives them some flexibility in drawing down additional liquidity as needed.”

Transport Minister Omar Alghabra said the government was still in negotiations with other airlines about possible aid.

Canada, the world’s second-largest nation by area, depends heavily on civil aviation to keep remote communities connected.

Opposition politicians fretted that further delays in announcing aid could result in permanent damage to the country.

Air Canada said it would resume services on nearly all of the routes it had suspended because of COVID-19.

‘SIGNIFICANT LAYER OF INSURANCE’

The deal removes a potential political challenge for the Liberals, who insiders say are set to trigger an election later this year.

The government has agreed to buy C$500 million worth of shares in the airline, at C$23.1793 each, or a 14.2% discount to Monday’s close, a roughly 6% stake.

“Maintaining a competitive airline sector and good jobs is crucially important,” Finance Minister Chrystia Freeland told reporters, adding the equity stake would allow taxpayers to benefit when the airline’s fortunes recovered.

The Canadian government previously approved similar loans for four other companies worth up to C$1.billion, including up to C$375 million to low-cost airline Sunwing Vacations Inc. The government has paid out C$73.47 billion under its wage subsidy program and C$46.11 billion in loans to hard-hit small businesses.

Michael Rousseau, Air Canada‘s president and chief executive officer, said the liquidity “provides a significant layer of insurance for Air Canada.”

Jerry Dias, head of the Unifor private-sector union, described the announcement as “a good deal for everybody.”

Unifor represents more than 16,000 members working in the air transportation sector.

But the Canadian Union of Public Employees, which represents roughly 10,000 Air Canada flight attendants, said the package protected the jobs of current workers rather than the 7,500 members of its union who had been let go by the carrier.

($1=1.2567 Canadian dollars)

(Reporting by David Ljunggren in Ottawa and Allison Lampert in Montreal; Additional reporting by Julie Gordon in Ottawa and Munsif Vengattil in Bengaluru; Editing by Dan Grebler and Peter Cooney)

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U.K. advises limiting AstraZeneca in under-30s amid clot worry

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LONDON —
British authorities recommended Wednesday that the AstraZeneca COVID-19 vaccine not be given to adults under 30 where possible because of strengthening evidence that the shot may be linked to rare blood clots.

The recommendation came as regulators both in the United Kingdom and the European Union emphasized that the benefits of receiving the vaccine continue to outweigh the risks for most people — even though the European Medicines Agency said it had found a “possible link” between the shot and the rare clots. British authorities recommended that people under 30 be offered alternatives to AstraZeneca. But the EMA advised no such age restrictions, leaving it up to its member-countries to decide whether to limit its use.

Several countries have already imposed limits on who can receive the vaccine, and any restrictions are closely watched since the vaccine, which is cheaper and easier to store than many others, is critical to global immunization campaigns and is a pillar of the UN-backed program known as COVAX that aims to get vaccines to some of the world’s poorest countries.

“This is a course correction, there’s no question about that,” Jonathan Van-Tam, England’s deputy chief medical officer, said during a press briefing. “But it is, in a sense, in medicine quite normal for physicians to alter their preferences for how patients are treated over time.”

Van-Tam said the effect on Britain’s vaccination timetable — one of the speediest in the world — should be “zero or negligible,” assuming the National Health Service receives expected deliveries of other vaccines, including those produced by Pfizer and Moderna.

EU and U.K. regulators held simultaneous press conferences Wednesday afternoon to announce the results of investigations into reports of blood clots that sparked concern about the rollout of the AstraZeneca vaccine.

The EU agency described the clots as “very rare” side effects. Dr Sabine Straus, chair of EMA’s Safety Committee, said the best data is coming from Germany where there is one report of the rare clots for every 100,000 doses given, although she noted far fewer reports in the U.K. Still, that’s less than the clot risk that healthy women face from birth control pills, noted another expert, Dr. Peter Arlett.

The agency said most of the cases reported have occurred in women under 60 within two weeks of vaccination — but based on the currently available evidence, it was not able to identify specific risk factors. Experts reviewed several dozen cases that came mainly from Europe and the U.K., where around 25 million people have received the AstraZeneca vaccine.

“The reported cases of unusual blood clotting following vaccination with the AstraZeneca vaccine should be listed as possible side effects of the vaccine,” said Emer Cooke, the agency’s executive director. “The risk of mortality from COVID is much greater than the risk of mortality from these side effects.”

Arlett said there is no information suggesting an increased risk from the other major COVID-19 vaccines.

The EMA’s investigation focused on unusual types of blood clots that are occurring along with low blood platelets. One rare clot type appears in multiple blood vessels and the other in veins that drain blood from the brain.

While the benefits of the vaccine still outweigh the risks, that assessment is “more finely balanced” among younger people who are less likely to become seriously ill with COVID-19, the U.K’s Van-Tam said.

“We are not advising a stop to any vaccination for any individual in any age group,” said Wei Shen Lim, who chairs Britain’s Joint Committee on Vaccination and Immunization. “We are advising a preference for one vaccine over another vaccine for a particular age group, really out of the utmost caution rather than because we have any serious safety concerns.”

In March, more than a dozen countries, mostly in Europe, suspended their use of AstraZeneca over the blood clot issue. Most restarted — some with age restrictions — after the EMA said countries should continue using the potentially life-saving vaccine.

Britain, which relies heavily on AstraZeneca, however, continued to use it.

The suspensions were seen as particularly damaging for AstraZeneca because they came after repeated missteps in how the company reported data on the vaccine’s effectiveness and concerns over how well its shot worked in older people. That has led to frequently changing advice in some countries on who can take the vaccine, raising worries that AstraZeneca’s credibility could be permanently damaged, spurring more vaccine hesitancy and prolonging the pandemic.

Dr. Peter English, who formerly chaired the British Medical Association’s Public Health Medicine Committee, said the back-and-forth over the AstraZeneca vaccine globally could have serious consequences.

“We can’t afford not to use this vaccine if we are going to end the pandemic,” he said.

In some countries, authorities have already noted hesitance toward the AstraZeneca shot.

“People come and they are reluctant to take the AstraZeneca vaccine, they ask us if we also use anything else,” said Florentina Nastase, a doctor and co-ordinator at a vaccination centre in Bucharest, Romania. “There were cases in which people (scheduled for the AstraZeneca) didn’t show up, there were cases when people came to the centre and saw that we use only AstraZeneca and refused (to be inoculated).”

Meanwhile, the governor of Italy’s northern Veneto region had said earlier Wednesday that any decision to change the guidance on AstraZeneca would cause major disruptions to immunizations — at a time when Europe is already struggling to ramp them up — and could create more confusion about the shot.

“If they do like Germany, and allow Astra Zeneca only to people over 65, that would be absurd. Before it was only for people under 55. Put yourself in the place of citizens, it is hard to understand anything,” Luca Zaia told reporters.

The latest suspension of AstraZeneca came in Spain’s Castilla y Leon region, where health chief Veronica Casado said Wednesday that “the principle of prudence” drove her to put a temporary hold on the vaccine that she still backed as being both effective and necessary.

French health authorities had said they, too, were awaiting EMA’s conclusions, as were some officials in Asia.

On Wednesday, South Korea said it would temporarily suspend the use of AstraZeneca’s vaccine in people 60 and younger. In that age group, the country is only currently vaccinating health workers and people in long-term care settings.

The Korea Disease Control and Prevention Agency said it would also pause a vaccine rollout to school nurses and teachers that was to begin on Thursday, while awaiting the outcome of the EMA’s review.

But some experts urged perspective. Prof Anthony Harnden, the deputy chair of Britain’s vaccination committee, said that the program has saved at least 6,000 lives in the first three months and will help pave the way back to normal life.

“What is clear it that for the vast majority of people the benefits of the Oxford AZ vaccine far outweigh any extremely small risk,” he said. “And the Oxford AZ vaccine will continue to save many from suffering the devastating effects that can result from a COVID infection.”

Source: – CTV News

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