Before he lost US$20 billion, Bill Hwang was the greatest trader you had never heard of

In March, Korean-American trader Bill Hwang made history when his Archegos Capital Management lost US$20 billion in two days. How?

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Trader Bill Hwang. Photo: Bloomberg / Emile Wamsteker

Erik Schatzker,Sridhar NatarajanandKatherine Burton

Published: 8:15pm, 1 May 2021Updated: 8:15pm, 1 May 2021

Before he lost it all – all US$20 billion – Bill Hwang was the greatest trader you had never heard of.

Starting in 2013, the Korean-American investor parlayed more than US$200 million left over from his closed hedge fund into a mind-boggling fortune by betting on stocks. Had he folded his hand in early March and cashed in, Hwang, 57, would have stood out among the world’s billionaires. There are richer men and women, of course, but their money is mostly tied up in businesses, property, complex investments, sports teams and artwork. Hwang’s US$20 billion net worth was mostly liquid. And then, in two short days, it was gone.

The sudden implosion of Hwang’s New York-based Archegos Capital Management, in late March, is one of the most spectacular failures in modern financial history: no individual has lost so much money so quickly. At its peak, Hwang’s wealth briefly eclipsed US$30 billion. It is also a peculiar one. Unlike the Wall Street stars and Nobel laureates who ran Long-Term Capital Management, which famously blew up in 1998, Hwang was largely unknown outside a small circle of fellow church-goers, former hedge fund colleagues and a handful of bankers.

He became the biggest of whales without ever breaking the surface. By design or by accident, Archegos never showed up in the regulatory filings that disclose major shareholders of public stocks. Hwang used swaps, a type of derivative that gives an investor exposure to the gains or losses in an underlying asset without owning it directly. This concealed both his identity and the size of his positions. Even the firms that financed his investments could not see the big picture.

I grew up in a pastor’s family. We were poor

Bill Hwang

That is why, on Friday, March 26, when investors around the world learned that a company called Archegos had defaulted on loans used to build a staggering US$100 billion portfolio, the first question was, “Who on earth is Bill Hwang?” Because he was using borrowed money and levering up his bets fivefold, Hwang’s collapse left a trail of destruction. Banks dumped his holdings, savaging stock prices. Credit Suisse, one of Hwang’s lenders, lost US$4.7 billion, and several top executives, including the head of investment banking, have been forced out. Nomura Holdings faces a loss of about US$2 billion.

Hwang is anything but the larger-than-life figure one might expect at the centre of a financial fiasco. There is no penthouse overlooking Manhattan’s Central Park, no private jets. “I grew up in a pastor’s family. We were poor,” he said in a video recorded at New Jersey’s Metro Community Church in 2019. “I confess to you, I could not live very poorly. But I live a few notches below where I could live.”