The crisis of a large American hedge fund has rocked the market, sparking sell-offs of at least $ 30 billion on some influential stocks in its portfolio. Particularly under pressure are mass media and Internet companies such as ViacomCbs and Discovery, which in the past had soared and quickly lost more than a quarter of their value, and Chinese tech brands from Baidu to Tencent. The crisis also threatens to cause billion-dollar losses among exposed international banks such as Credit Suisse and Nomura.
The fund at the center of the earthquake has been identified by rumors as Archegos, a large private family office based in the heart of New York and founded by Bill Hwang, former manager of Tiger Asia and a pupil of hedge pioneer Julian Robertson with his Tiger Management. . According to what emerged Archegos, whose transparency is very limited, had investments for tens of billions of dollars.
Loading…
The perfect storm
Here is the dynamics of the earthquake: banks that offer him brokerage services such as Credit Suisse, in the face of fund losses on his bets, triggered the so-called margin calls on his account last week, the “red lights” lit by a broker in the against a client when their financial position is deteriorating due to large losses on their investments. When the fund failed to meet these demands, it resulted in a forced liquidation of assets.
Banks allow funds to buy by borrowing to increase the firepower of the funds, but margin calls require you to deposit additional guarantees or resources (collateral) when necessary in the face of declines in the value of investments.
Banks in check
Credit Suisse indicated that it could experience a significant material impact from the crisis in the first quarter. Nomura has forecast losses of two billion dollars. The two banks have not officially identified the US customer who defaulted on margin calls, whose name is however filtered in the American and international press.