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Ivolga Capital company blog | The margin call of an investment fund from the United States led to billions in losses of large investment banks and the sale of shares of IT companies and media corporations.



Back on Friday, the business media reported an unusually large sale: Goldman Sachs sold $ 10 billion worth of shares in American and Chinese companies.

By Monday, the reason was known. Investment fund Archegos, which managed $ 10 billion in assets, allowed a margin call. The fund’s assets were heavily concentrated in the IT and media communications sector. Investment banks, which provided brokerage services to the fund, had to close positions, which provoked a massive sell-off.

Swiss Credit Suisse and Japan’s Nomura announced losses on Monday. Credit Suisse did not give quantitative estimates, according to the FT, two people close to the bank said the expected losses were estimated at $ 3 billion to $ 4 billion.

Nomura said it estimates the size of the potential damages, noting that its alleged claim is around $ 2 billion.

It is noteworthy that in addition to Nomura and Credit Suisse, the fund cooperated with Goldman Sachs, Morgan Stanley and UBS, which did not suffer significant losses.

Interlocutors FT associate the losses of banks with poor risk management and an extremely high level of risk. One Tokyo banker said the extremely high level of leverage Nomura apparently provided to Archegos was “baffling.” Other brokers providing leverage for Archegos said Nomura and Credit Suisse were having problems with the slower offloading of equity stakes to the market compared to other brokers.

One of the executives of a global hedge fund in Hong Kong said: “It’s amazing that a China-focused fund used Nomura and received such a lot of leverage from a Japanese bank. It looks like it was at least four times more than usual. “
Western business media are pointing out that the fund managed Bill Hwan’s fortune. Prior to that, Hwang worked at Tiger Asia Management LLC. Tiger Asia returned the money to investors after Hwang admitted in December 2012 that the hedge fund criminally used investment bank insider information at least three times to profit from securities trades.
Hwang’s past leaves open the question: were the losses of banks related only to poor risk management and extremely high leverage, or were Archegos’ activities accompanied by fraudulent schemes and misleading counterparties.

One way or another, the negative news did not spread to the entire market. On Monday, the S&P closed with a minor loss of -0.09%, Nikkei225 + 0.71%, SWI -0.24%.

Mark Savichenko

Sources: www.wsj.com/articles/japans-nomura-says-us-client-owes-it-2-billion-shares-fall-15-11616992085
www.ft.com/content/073509cd-fe45-44d2-afac-cace611b6900

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