Bill Hwang d’Archegos built wealth at historic rate before losing it all, FOX Business survey finds

It’s life.

Before his epic collapse this week, losing an estimated $ 8 billion in 10 days, hedge fund trader Bill Hwang increased his wealth size by 900% or more in just seven years. For the man behind Archegos Capital Management, this may be one of the fastest growing and destroying wealth in recent history, FOX Business has learned.

FOX Business was able to trace the growth of Hwang’s personal fortune – which Wall Street sources say largely consisted of money he traded to Archegos – to a research report compiled by the advisory group in philanthropy Jerold Panas, Linzy & Partners, Inc for a Christian college. who was looking for donations from Hwang.

WHO IS BILL HWANG, ARCHEGOS FUND MANAGER?

About seven years ago, King’s College was looking for wealthy donors to support its vision for an evangelical Christian institution of higher learning in Manhattan. The college tasked the consulting firm to help them estimate the net worth of a person who, on paper at least, ticked all the right boxes.

Hwang, a longtime hedge fund trader, was both wealthy and important in raising funds for evangelical institutions and causes. The consulting firm’s report, completed around 2014, estimated Hwang’s fortune at less than $ 1 billion, according to a person with direct knowledge of the matter.

“He was clearly wealthy, but not as wealthy as the other donors we were trying to involve,” said the person, who was a senior college administrator.

It wouldn’t be long before Hwang became one of the school’s richest donors. Just before Archegos’ epic collapse in late March, Hwang managed a portfolio valued at between $ 10 billion and $ 15 billion, Wall Street traders say. Most, if not all, was his own money, making him one of the richest people in the world.

Larry McDonald, former Wall Street trader and creator of the Bear Traps Report, a newsletter for hedge fund professionals, believes Hwang must have compiled annual returns of 35% or more to see such an explosion in assets under management.

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This would place Hwang, according to McDonald’s, among some of the biggest and best traders on the street – before he exploded.

“If these numbers are correct, they are truly staggering,” said McDonald. “What makes it even more impressive is that it was doing so well at a time when hedge funds were going through difficult times and were losing the favor of passive investing.”

McDonald added that “the only way to produce these types of numbers so quickly is to use a lot of leverage and be right most of the time. Equally stunning, he delivered it all in an instant.

A spokesperson for Archegos and Hwang declined to comment, but did not dispute any of the information in that report.

In a previous statement, the company said: “These are difficult times for the Archegos Capital Management family office, our partners and our employees. All plans are being discussed as Mr. Hwang and the team determine the best way forward. “

Kings College would not dispute the FOX Business reports either, but said in a statement: “King’s College is grateful for Mr. Hwang’s generosity … We have seen firsthand that their philanthropic efforts are making an immense difference. social and religious good. Among the many programs they make possible on our campus is a weekly public scripture reading where our students gather to hear the Bible read aloud. Our prayers are with Mr. Hwang and his staff, both on the foundation side and on the Archegos side, as they maneuver through this difficult time. “

FAMILY OFFICES LIKE ARCHEGOS TAKE GREAT RISKS LIKE HEDGE FUNDS

Jerold Panas, Linzy & Partners, Inc also did not dispute this report and did not respond to numerous requests for comment.

According to Internal Revenue Service documents for Hwang’s charitable foundation, the Grace and Mercy Foundation, he donated nearly $ 2 million to King’s College between 2011 and 2017, a period during which Archegos was making funds. significant gains in the market.

The Grace and Mercy Foundation, established by Hwang in 2006, has donated millions to notable religious organizations in the United States and Asia, including the Fuller Theological Seminary, the Bowery Mission which helps the homeless, and the ministry focused on the homeless. young people, Young Life.

As FOX Business reported, the foundation was affiliated with the Archegos family office which managed Hwang’s wealth. Both offices and staff shared.

Andy Mills, who is listed on the Archegos website as its “Executive Chairman and Co-CEO,” also served, according to his LinkedIn profile, as the “Co-Chair” of the Grace and Mercy Foundation. Mills also served as Kings College board chair between 2004 and 2014, and twice during those years served as the college’s interim president.

Through Archegos’ spokesperson, Mills made no comment.

Grace and Mercy was also involved in some of the types of complex financial transactions Hwang used in Archegos, according to the foundation’s IRS records. While Grace and Mercy have received millions of donations of stocks, including high-end tech Amazon and Netflix, records show that she also bought and sold derivatives known as swaps and various hedge funds and offshore trusts with mixed results.

Hwang has been described as a quiet and pious Christian, the son of an evangelical Christian minister from Korea. Unlike other fund managers, he avoided the financial press and never made the annual billionaire lists published by outlets such as Forbes. When it was quoted in the press, it was mainly about his Christian faith and his charitable contributions.

Hwang made his mark, albeit quietly, in the hedge fund industry and on Wall Street trading counters where he was known as an aggressive trader and a protégé of former Tiger Management founder Julian Robertson. In 2012, Hwang was banned from hedge fund activity after the Securities and Exchange Commission filed a lawsuit against him for insider trading and stock manipulation.

Without admitting or denying the wrongdoing, Hwang settled the civil case for $ 44 million and shut down his hedge fund at the time, Tiger Asia.

The ban would be officially lifted in 2020, but that didn’t stop Hwang from trading his own account and accessing derivatives through big Wall Street companies like Credit Suisse and Goldman Sachs when he launched his family office, Archegos, in 2013.

How Hwang was able to grow his business 900% or more in just seven years is still largely a mystery. But, according to Wall Street sources, Hwang engaged in sophisticated, and some would say, risky trading strategies that allowed him to take relatively small bets on stocks and other investments and reap huge gains. . He was able to increase his earnings through the use of leverage or high borrowing.

Such trading techniques can generate huge profits if investors bet correctly, but also huge losses when they don’t.

Teleprinter	security	Last	Change	Change%
GS	THE GOLDMAN SACHS GROUP, INC.	327.64	+0.64	+ 0.20%
CS	CREDIT SUISSE GROUP AG	10.70	+0.10	+ 0.94%
NMRA	n / A	n / A	n / A	n / A
MRS	MORGAN STANLEY	78.22	+0.56	+ 0.72%

Hwang was said to be a follower of a derivative known as a “total return swap”. He bought them from big investment banks such as Credit Suisse in Switzerland, Nomura in Japan, and closer to home, Goldman Sachs on Wall Street and Morgan Stanley.

These swaps are financial products that allow a trader to have relatively little of his or her own money to create massive “synthetic” long positions in company stocks. By using derivatives, Hwang created massive long positions in certain stocks, even though he did not own the stocks, thereby avoiding regulatory disclosure obligations. He spread those positions among these companies, which effectively disguised how much he wagered on various investments, traders say.

While swaps can generate huge returns in a rising market, they are also some of the most lucrative commodities to sell on the streets. Hwang has become one of Wall Street’s biggest customers, traders say, which could explain why these blue-chip companies are ignoring Hwang’s checkered regulatory track record.

It may also explain why the banks didn’t demand more information about the house of cards that Archegos was building. Ironically, one of Hwang’s best bets turned out to be the catalyst for his downfall: a massive long position on ViacomCBS, which had reached new highs until a side offer was announced on March 22.

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The announcement sparked a sell off amid investor fears of being watered down. The sharp drop in ViacomCBS triggered margin calls which Archegos could not meet, and some of its other positions also started to weaken.

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AFTER	VIACOMCBS, INC.	44.64	-0.46	-1.02%

During the last week of March, its brokers began to sell its positions and their trades-related positions, unloading between $ 50 billion and $ 100 billion of various securities. In the process, Hwang’s brokers suffered billions of dollars in losses as they unwound these bets.

Credit Suisse said its unspecified losses would be significant and traders estimate it could reach $ 3-5 billion and force the company to raise capital. Goldman, according to people familiar with the matter, says the losses will not be significant to its income statement, but could reach $ 1 billion.

The Securities and Exchange Commission is investigating the matter. Neither Goldman nor Credit Suisse would comment. The SEC said in a statement, “We have been monitoring the situation and communicating with market players since last week.”

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At Kings College, Hwang’s problems are both sad and shocked.

Former students recall a speech he gave at school in 2019 in which Hwang spoke about how his faith and his work in finance were inextricably linked.

According to someone in attendance, Hwang told the students that if he was more public about his wealth, he would rank high on Forbes’ billionaire list. “I look at the billionaire lists and think if I wasn’t under the radar I would be pretty high up there,” he said.