Here we go again…” was the first thing that went through my mind when I first heard about Archegos blowing up. Just like most people, I have never heard of this sizeable hedge fund cleverly disguised as a family office. If not for this fiasco, this fund would continue to operate in the shadows and be known to only a small group of people. By registering as a family office, Archegos was able to circumvent many regulations and avoid most of the reporting required of hedge funds. Aside from people who knew the owner personally, nobody had any idea how big Archegos has gotten. So what is the next thing that goes through your mind at this point? Yes, how many other funds like this one are out there? The estimates right now are that Archegos lost between $20-$100 billion. Is this a Bear Stearns moment which will cause a domino effect? At the moment it looks like the system will pull through this somehow, but again, how many more of these gamblers-with-billions type of family offices are out there? Most likely more than anybody can imagine right now. And we will not find out until “the time comes.” However for now, let’s look at some stocks that got decimated as a result of the liquidation of this one “family office.” Tiger Asia fund changed its name to Archegos after pleading guilty to insider trading in 2012. After the name change, the investment banks took the fund back on as a client for total return swaps. This allowed Archegos to use its $10 billion of capital to gain exposure of many times that amount. When the fund couldn’t meet a margin call, the investment banks started dumping large blocks of the collateral stocks. The first affected stock was Tencent. Although, because of its size it only had a small crash. It was actually the least affected of all the stocks mentioned here. Next on the list is Baidu. However it’s decline was also somewhat muted. But when we move on to VipShop we notice that it was not so lucky and we see a 34% selloff. Another stock that experienced a crash was fair Farefetch, down 30%. The real carnage was in Viacom CBS, which saw a 51% decline. This was the stock that actually triggered the margin call and started the selloff of the Archegos fund. Jeremy Grantham said that small bubbles always start popping first before the big bubble bursts. And this is exactly what happened here. A bubble in one stock caused a domino effect which took down the whole fund. Discovery Communications also went down 30%, while GSXTechedu was down a staggering 64%.
Russia says it will remove dollar assets from its wealth fund - The move was announced at the St. Petersburg International Economic Forum on Thursday by Finance Minister Anton Siluanov. “Like the central bank, we have decided to reduce investments of the NWF in dollar assets" https://t.co/PHCbUqvy6f