Sources tell FOX Business’s Charlie Gasparino that IRS documents show the Grace & Mercy Foundation invested in swaps and foreign funds with mixed results.
Easy come easy go.
Before its epic collapse this week lost an estimated $ 8 billion in ten days, hedge fund trader Bill Hwang increased his fortune by just 900 percent or more in just seven years. For the man behind Archegos Capital Management, it is perhaps one of the fastest creations and destructions of wealth in recent history, FOX Business has learned.
FOX Business was able to compile the growth in Hwang’s personal fortune – which according to Wall Street sources largely consists of the money he traded at Archegos – after a research report by philanthropy consulting group Jerold Panas, Linzy & Partners, Inc. set up for a Christian college. who was looking for donations from Hwang.
WHO IS ARCHEGOS FUND MANAGER HWANG?
About seven years ago, The King’s College was looking for wealthy donors to support its vision for an Evangelical Christian higher education institution in Manhattan. The college instructed the consulting firm to estimate the net worth of someone who, at least on paper, checked all the right subjects.
Hwang, a longtime hedge fund trader, was wealthy and prominent in raising money for evangelical institutions and affairs. According to the consulting firm’s report, which was completed around 2014, Hwang’s fortune is estimated at less than $ 1 billion, according to someone with direct knowledge of it.
“He was clearly wealthy, but not as rich as other donors we wanted to bring on board,” said the person, who was a senior administrator at the college.
It would not be long before Hwang became one of the school’s richest donors. Just before Archegos’ epic collapse at the end of March, Hwang managed a portfolio valued at between $ 10 billion and $ 15 billion, Wall Street traders estimate. It was mostly just his own money, which made him one of the richest people in the world.
Larry McDonald, a former Wall Street trader and creator of the ‘Bear Traps Report’, an investment newsletter for hedge fund professionals, estimates that Hwang should have compiled annual returns of 35 percent or more to manage such an explosion in assets under management to see.
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According to McDonald, this would put Hwang among one of the biggest and best dealers on the street – before his explosion.
“If the numbers are accurate, it’s amazing,” McDonald said. “What makes it even more impressive is that he did so well at a time when hedge funds were hit hard and lost passive investment.”
McDonald added that ‘the only way you can produce such numbers so quickly is to use a lot of leverage and be mostly right. Just as amazing, he returned it all in an instant. ”
Bill Hwang, who was shown in 2012, emigrated to the US after high school in South Korea and led one of the largest Asia-focused hedge funds. PHOTO: EMILE WAMSTEKER / BLOOMBERG NEWS
A spokesman for Archegos and Hwang declined to comment, but did not dispute any information in this report.
In an earlier statement, the company said: ‘This is a challenging time for the family office of Archegos Capital Management, our partners and employees. All plans are discussed as Mr. Hwang and the team determined the best way forward. ”
The Kings College also does not dispute the reporting of FOX Business, but says in a statement: “The King’s College is grateful for the generosity of Mr. Hwang … We have seen firsthand that their philanthropic efforts make great social and religious good possible Among the many programs they make possible on our campus is a weekly public reading of Scripture where our students gather to hear the Bible read aloud.Our prayers are with Mr. Hwang and his staff, both at the foundation – and Archegos side, as they move this difficult time. ‘
FAMILY OFFICES LIKE ARCHEGOS MAJOR RISKS LIKE REPORT FUNDS
Jerold Panas, Linzy & Partners, Inc. would also not dispute this report and did not respond to numerous requests for comment.
According to the Internal Revenue Service documents for Hwang’s charity, the Grace and Mercy Foundation, he donated nearly $ 2 million to The King’s College between 2011 and 2017, a period in which Archegos made significant market profits.
The Grace and Mercy Foundation, founded in 2006 by Hwang, has donated millions to notable religious organizations in the United States and Asia, including Fuller Theological Seminary, the Bowery Mission that helps homeless people, and the youth-oriented ministry, Young Life.
As FOX Business reports, the foundation was attached to the Archegos family office that managed Hwang’s wealth. The two shared offices and staff.
Andy Mills, who is listed on Archegos’ website as his “executive chairman and co-executive,” also serves as “co-chairman” of the Grace and Mercy Foundation, according to his LinkedIn profile. Mills also chaired the board of trustees for The Kings College between 2004 and 2014, and served twice as acting president of the college during those years.
Through the Archegos spokesman, Mills did not comment.
Grace and Mercy were also involved in some of the types of complicated financial transactions that Hwang used at Archegos, the foundation’s IRS records show. While Grace and Mercy received millions of shares of stock, including tech high-flyers Amazon and Netflix, reports show that it also bought and sold derivatives, known as swaps, and various hedge funds and foreign trusts with mixed results.
Hwang is described as a low profile and a devout Christian, the son of an evangelical minister from Korea. Unlike other money managers, he avoids the financial press and never makes the annual billionaire lists published by stores like Forbes. When he was quoted in the press, it was mostly about his Christian faith and charitable contributions.
Admittedly, Hwang made his mark, albeit quietly, in the hedge fund business and on Wall Street commercial banks, where he was known as an aggressive trader and protégé of the former founder of Tiger Management, Julian Robertson. In 2012, Hwang was banned from the hedge fund business after the Securities and Exchange Commission filed a lawsuit against him over insider trading and stock manipulation.
Without acknowledging or denying crimes, Hwang settled the $ 44 million civil case and closed his then-Tiger Hedge fund.
The ban was to be officially lifted in 2020, but that did not stop Hwang from trading his own account and gaining access to derivative products through major Wall Street companies such as Credit Suisse and Goldman Sachs when he opened his family office, Archegos, in 2013 from did not launch.
How Hwang was able to grow his business 900 percent or more in the space of just seven years is still largely a mystery. But according to Wall Street sources, Hwang has developed sophisticated, and some would say, risky trading strategies that have enabled him to place relatively small bets on stocks and other investments and make big profits. He was able to further increase his profits by using leverage or high loan rates.
Such trading techniques can create huge profits if investors bet right, but also excessive losses if they do not.
| Ticker | Safety | Last | Alter | Alter% |
|---|---|---|---|---|
| GS | THE GOLDMAN SACHS GROUP, INC. | 327.64 | +0.64 | + 0.20% |
| CS | CREDIT SUISSE GROEP AG | 10.70 | +0.10 | + 0.94% |
| NMRA | after | after | after | after |
| MS | MORGAN STANLEY | 78.22 | +0.56 | + 0.72% |
Hwang has been said to be a fan of a derivative instrument known as the ‘total barter’. He bought it from major investment banks such as Switzerland Credit Suisse, the Japanese Nomura, and closer to home, Wallman’s Goldman Sachs, and Morgan Stanley.
These barter transactions are financial products that enable a trader to invest relatively little of his money to create massive ‘synthetic’ long positions in shares of companies. Using derivatives, Hwang created massive, long positions in certain stocks, even though he did not own the shares directly, thus avoiding the requirements for disclosure of regulations. He has spread these positions among these companies, effectively obscuring how much he has put on different investments.
While barter transactions can yield a large return in a rising market, they are also the most profitable products the street can sell. Hwang has become one of Wall Street’s biggest customers, say retailers, which could be such blue-chip businesses looking over Hwang’s checkered regulatory record.
It may also explain why the banks no longer disclosed the card house that Archegos built. Ironically, it seems that one of Hwang’s best bets was the catalyst for his downfall: a massive long position in ViacomCBS, which reached new highs until it announced a secondary offer on 22 March.
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The announcement caused a big sell-out amid fears from investors about dilution. The sharp drop in ViacomCBS led to calls that Archegos could not meet, and some of its other positions also began to falter.
| Ticker | Safety | Last | Alter | Alter% |
|---|---|---|---|---|
| VIAC | VIACOMCBS, INC. | 44.64 | -0.46 | -1.02% |
By the last week in March, its brokers began selling its positions and linked their positions to its trades, which were estimated to have been downloaded between $ 50 billion and $ 100 billion in various securities. In the process, Hwang’s brokers suffered billions of dollars in losses because they withdrew this bet.
Credit Suisse said the unspecified losses would be material and traders estimated it could be between $ 3 billion and $ 5 billion, forcing the company to raise capital. According to people with knowledge of the matter, Goldman says that the losses will not be material to his profit and loss account, but up to $ 1 billion.
The Securities and Exchange Commission is investigating the matter. Neither Goldman nor Credit Suisse will comment. The SEC said in a statement: “We have been monitoring the situation and communicating with market participants since last week.”
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At Kings College, Hwang’s sadness and shock are met.
Alumni recall a speech he gave at the school in 2019 in which Hwang spoke about how his faith and work were intertwined in finance.
According to a person who attended, Hwang told students that if he were more public about his wealth, he would be high on the Forbes list of billionaires. “I do look at the lists of billionaires and think if I were not under the radar, I would be pretty high up there,” he said.