Archegos Is No Big Deal, But Sounds a Warning Nonetheless
It wasn’t a systemic threat, but something similar could be.
Where’s your margin?
Photographer: Emile Wamsteker/Bloomberg.
Following the implosion of Archegos Capital Management, finance professionals everywhere are asking what, if anything, regulators should do. The answer for this particular case is: not a lot. Yet the firm’s collapse points to the possibility of something worse in future, and this danger does warrant attention.
Archegos is the fund in which Bill Hwang, a wealthy investor with an insider-trading rap, managed his family money. He used some of the money, along with more borrowed (via derivatives) from banks, to make billions of dollars in bets on stocks including ViacomCBS Inc., Discovery Inc. and Baidu Inc. When some of the stocks fell, he suffered big losses. Banks that had lent to him lost money, too. The total damage has been estimated at as much as $10 billion — headline-worthy, but not enough to threaten financial stability.