Sources told Charlie Gasparino of FOX Business that the IRS documents show that Grace & Mercy Foundation has invested in swaps and offshore funds with mixed results.
Easy Come Easy Go.
Before his epic meltdown this week, losing about $ 8 billion in 10 days, hedge fund broker Bill Hwang increased the size of his fortune by an impressive 900% or more in just seven years. For the man behind Archegos Capital Management, it may be one of the fastest wealth creations and destruction in recent history, FOX Business learned.
FOX Business was able to track the growth of Hwang’s personal fortune – which Wall Street sources say consisted largely of the money he traded at Archegos – to a research report compiled by philanthropic advisory group Jerold Panas, Linzy & Partners, Inc for a Christian college that was seeking donations from Hwang.
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About seven years ago, King’s College was looking for wealthy donors to support its vision of an evangelical Christian institution of higher education in Manhattan. The college hired the consulting firm to help it estimate the net worth of someone who, at least on paper, ticked all the right boxes.
Hwang, a longtime hedge fund trader, was wealthy and prominent in raising money for evangelical institutions and causes. The consultancy’s report, completed around 2014, estimated Hwang’s fortune to be less than $ 1 billion, according to a person with direct knowledge of the matter.
“He was clearly wealthy, but not as wealthy as other donors we were trying to bring in,” said the person, who was a senior administrator at the college.
It wouldn’t be long before Hwang became one of the school’s wealthiest donors. Just before Archegos’ epic collapse in late March, Hwang managed a portfolio valued between $ 10 billion and $ 15 billion, Wall Street traders estimate. Most, if not all, was his own money, which made him one of the richest people in the world.
Larry McDonald, a former Wall Street broker and creator of the “Bear Traps Report,” an investment newsletter for hedge fund professionals, estimates that Hwang must have compiled annual returns of 35% or more to see such an explosion in assets under management.
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That would put Hwang, according to McDonald, among some of the biggest and best traders on the street – before his explosion.
“If these numbers are accurate, they will be really surprising,” said McDonald. “What makes it all the more impressive is that it was doing very well at a time when hedge funds were going through a rough patch and were losing preference for passive investments.”
McDonald added that “the only way to produce these types of numbers so quickly is to use a lot of leverage and get it right most of the time. As surprising as that, he returned everything in an instant. “
Bill Hwang, shown in 2012, emigrated to the USA after attending high school in South Korea and went on to lead one of the largest hedge funds focused on Asia. PHOTO: EMILE WAMSTEKER / BLOOMBERG NEWS
A spokesman for Archegos and Hwang declined to comment, but did not contest any of the information in this report.
In a previous statement, the company said: “This is a challenging time for the family office of Archegos Capital Management, our partners and employees. All plans are being discussed as Mr. Hwang and the team determine the best way forward. “
Kings College also did not dispute FOX Business reports, but said in a statement: “King’s College is grateful for Mr. Hwang’s generosity … We have seen firsthand that his philanthropic efforts enable tremendous social and religious good. many programs that they make possible on our campus are a weekly Public Scripture Reading, where our students gather to hear the Bible read aloud. Our prayers are with Mr. Hwang and his team, both at the foundation and on the side of Archegos, while they maneuver in this difficult time. “
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Jerold Panas, Linzy & Partners, Inc also did not contest this report and did not respond to several requests for comment.
According to documents from the Internal Revenue Service for Hwang’s charitable foundation, Grace and Mercy Foundation, he donated about $ 2 million to King’s College between 2011 and 2017, a period when Archegos was producing earnings from significant market share.
The Grace and Mercy Foundation, created by Hwang in 2006, 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 youth ministry, Young Life.
As reported by FOX Business, the foundation was affiliated with the Archegos family office, which managed Hwang’s assets. The two offices and employees shared.
Andy Mills, listed on the Archegos website as its “executive chairman and co-executive director”, also served, according to his LinkedIn profile, as “co-chairman” of the Grace and Mercy Foundation. Mills was also chairman of the board of trustees at The Kings College between 2004 and 2014, and twice during those years he served as acting chairman of the college.
Through the Archegos spokeswoman, Mills did not comment.
Grace and Mercy was also involved in some of the types of complex financial transactions that Hwang used at Archegos, show the foundation’s IRS records. While Grace and Mercy received millions in stock donations, including high-tech companies Amazon and Netflix, records show that she also bought and sold derivatives known as swaps and various hedge funds and offshore trusts with mixed results.
Hwang was described as a devout and discreet Christian, the son of an evangelical Christian minister in Korea. Unlike other money managers, he avoided the financial press and never appeared on the annual lists of billionaires published by vehicles like Forbes. When he was quoted in the press, it was mainly about his Christian faith and charitable contributions.
Hwang left his mark, albeit quietly, on the hedge fund business and at Wall Street trading desks, where he was known as an aggressive and protected broker for former Tiger Management founder Julian Robertson. In 2012, Hwang was barred from entering the hedge fund business after the Securities and Exchange Commission moved him against him, alleging insider trading and stock manipulation.
Without admitting or denying wrongdoing, Hwang solved the civil case for $ 44 million and closed his hedge fund at the time, Tiger Asia.
The ban would be officially lifted in 2020, but that did not stop Hwang from trading with his own account and gaining access to derivative products through large Wall Street companies, such as Credit Suisse and Goldman Sachs, when he launched his family office, Archegos, in 2013.
It is still a big mystery how Hwang managed to grow his business by 900% or more in just seven years. But, according to Wall Street sources, Hwang engaged in sophisticated, and some would say, risky trading strategies that allowed him to place relatively small bets on stocks and other investments and reap huge gains. He was able to further increase his earnings through the use of leverage or high levels of loans.
These trading techniques can generate huge profits if investors bet right, but also disproportionate losses when they don’t.
| Ticker | Safety | Last | Change | Change % |
|---|---|---|---|---|
| GS | THE GOLDMAN SACHS GROUP, INC. | 327.64 | +0.64 | + 0.20% |
| CS | CREDIT SUISSE GROUP AG | 10.70 | +0.10 | + 0.94% |
| NMRA | n / a | n / a | n / a | n / a |
| in | MORGAN STANLEY | 78.22 | +0.56 | + 0.72% |
Hwang was said to be devoted to a derivative known as a “total return swap”. He bought them from major investment banks such as Switzerland’s Credit Suisse, Japan’s Nomura and, closer to home, Wall Street’s Goldman Sachs and Morgan Stanley.
These swaps are financial products that allow the trader to invest relatively little of his own money to create huge “synthetic” long positions in company stocks. By using derivatives, Hwang created long and massive positions in certain stocks, even if he did not own the shares immediately, thereby avoiding regulatory disclosure requirements. He spread these positions among these companies, which effectively disguised how much he bet on various investments, traders say.
While exchanges can create great returns in a rising market, they are also some of the most profitable products for sale on the street. Hwang has become one of Wall Street’s biggest customers, traders say, which may be responsible for those top-tier companies that are neglecting Hwang’s regulatory history.
This may also explain why the banks did not require further disclosure about the house of cards that Archegos was building. Ironically, one of Hwang’s best bets turned out to be the catalyst for his downfall: a huge long position at ViacomCBS, which had been hitting new highs until it announced a secondary offer on March 22.
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The announcement caused a massive sale amid investors’ fears of being watered down. The sharp decline at ViacomCBS has generated margin calls that Archegos has been unable to meet, and some of his other positions have also started to falter.
| Ticker | Safety | Last | Change | Change % |
|---|---|---|---|---|
| VIAC | VIACOMCBS, INC. | 44.64 | -0.46 | -1.02% |
In the last week of March, its brokers began selling their positions and positions linked to their trades, offloading about $ 50 billion to $ 100 billion in various securities. In the process, Hwang’s brokers suffered billions of dollars in losses by undoing those bets.
Credit Suisse said its unspecified losses would be significant and traders estimate that they could reach $ 3 billion to $ 5 billion and force the company to raise capital. Goldman, according to people with knowledge of the matter, is saying that the losses will not be material for its profit and loss statement, but could reach $ 1 billion.
The Securities and Exchange Commission is investigating the matter. Neither Goldman nor Credit Suisse declined to 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 The Kings College, Hwang’s problems are being faced with sadness and shock.
Alumni remember a speech he gave at school in 2019, in which Hwang talked about how his faith and his work in finance were intertwined.
According to one person present, Hwang told students that if he were more public about his wealth, he would be ranked high on the Forbes list of billionaires. “I look at the billionaire lists and I think that if I wasn’t off the radar, I would be right at the top,” he said.