Goldman’s U-turn on Archegos Capital’s Bill Hwang puts the Wall Street bank at the nexus of margin call mayhem in world markets
- Goldman emailed clients to tell them that it had been one of the banks selling as much as US$10.5 billion in holdings, according to an email seen by Bloomberg
- By Friday morning, one bank after another had started exercising the right to declare Hwang in default and liquidate his positions to recover their capital
Those misgivings did not last. Wall Street’s premier investment bank, lured by the tens of millions of dollars a year in commissions that a whale like Hwang paid to rival dealers, removed his name from its blacklist and allowed him to become a major client. Just as Morgan Stanley, Credit Suisse Group and others did, Goldman fuelled a pipeline of billions of dollars in credit for Hwang to make highly leveraged bets on stocks such as Chinese tech giant Baidu and media conglomerate Viacom CBS.
Now Hwang is at the centre of one of the greatest margin calls of all time, his giant portfolio in a messy and painful liquidation, and Goldman’s reversal has thrust it right into the mayhem.
Goldman even emailed clients late Friday to tell them that it had in fact been one of the banks selling. The email, a copy of which was seen by Bloomberg, detailed a total of US$10.5 billion in trades. The message did not name Hwang or Archegos.
Representatives for Goldman, Morgan Stanley and Credit Suisse declined to comment. Efforts to reach Hwang and his associates at Archegos were unsuccessful.
A so-called Tiger Cub who worked for Julian Robertson at Tiger Management, Hwang set up Archegos as a family office after shutting down his own hedge fund. Traders familiar with his orders describe Hwang running a long-short strategy with exceptionally large leverage, meaning that for every dollar of his own, he’d pile on several times as much in borrowed money.