Once high-flying Tiger cub stumbles again on leveraged bets

New York

HE WAS a hot-shot disciple of the hedge fund legend Julian Robertson - one of the stars to strike out on his own from the vaunted Tiger empire. Now Bill Hwang is at the centre of an extraordinary spree of giant stock trades that has reverberated through financial markets and set Wall Street abuzz.

Morgan Stanley and Goldman Sachs, along with other major banks, forced the liquidation of more than US$20 billion of holdings for Mr Hwang's New York-based Archegos Capital Management on Friday, according to people familiar with the transactions. Among the sales were shares of ViacomCBS, GSX Techedu, Farfetch and Discovery.

The unprecedented sell-off is the latest twist in Mr Hwang's long and controversial career. About two decades ago, he was a peer at Mr Robertson's firm of Chase Coleman, who was Wall Street's highest-earning hedge fund manager last year. Today, having long ago stopped managing outside money, he is facing his second major scandal.

How and why marquee-name banks embraced Mr Hwang after his first stumble - an insider trading plea in 2012 - and enabled him to run up so much leverage is an open question on Wall Street, though his frequent trading and use of borrowed money meant he was a profitable client.

Much of the leverage was provided by the banks through swaps, according to people with direct knowledge of the deals. That meant that Archegos didn't have to disclose its holdings in regulatory filings, since the positions were on the banks' balance sheets. Swaps are also an easy way to add a lot of leverage to a portfolio.

Market participants estimate that his assets had grown anywhere from US$5 billion to US$10 billion and total positions may have topped US$50 billion.

Mr Hwang didn't reply to multiple e-mails since Friday's market moves, and other Archegos employees reached by phone declined to comment on the liquidation of its positions or on the losses.

Despite his roots at Mr Robertson's Tiger Management, Mr Hwang was never a well-known name on Wall Street or in New York social circles.

A devout Christian, he is a trustee of the evangelical Fuller Theology Seminary in California and the co-founder of the Grace and Mercy Foundation, according to Fuller's website. The charity is dedicated to the areas of Christianity, art, education, justice and poverty.

After leaving Tiger Management as Mr Robertson wound down the firm, Mr Hwang, who is in his mid-50s, spent a decade running his Tiger Asia Management - backed by his former boss - and building it into a multi-billion firm with top returns.

In 2012, he closed the hedge fund after he admitted on behalf of the firm in federal court in Newark, New Jersey, to trading on inside information. According to the Justice Department, Tiger Asia reaped US$16 million of illicit profits in 2008 and 2009.

Mr Hwang bounced back almost immediately, opening a family office named Archegos - Greek for "one who leads the way".

After earning a degree in economics from the University of California at Los Angeles in 1988, and getting an MBA from Carnegie Mellon University, Mr Hwang became an institutional stock salesman. He was at Hyundai Securities in the early 1990s when he caught the eye of Mr Robertson, who was one of his clients. "He was the best salesman we had," Mr Robertson said in a 2006 interview. "He introduced us to Korea. No one was focusing on Korea back then and we hired him soon after."

After Tiger Management shut down, Mr Robertson seeded Mr Hwang with about US$25 million for his own firm. "He's had a meteoric rise," Mr Robertson said at the time.

As a manager of his own fund, Mr Hwang did not provide much transparency to investors about his positions or what contributed to returns, said a person who invested with him. Even so, clients stayed because he was a money-maker, with an annualised return of 16 per cent over the life of the fund.

At Archegos, his fortune grew with his outsized bets and rapid trading, a style that Mr Hwang never spoke about. "It's not all about the money, you know," he said in a rare interview with a Fuller executive in 2018, in which he spoke about his calling as an investor and his faith. "It's about the long term, and God certainly has a long-term view." BLOOMBERG