The international banks might lose more than $6 billion. Bill Hwang, the former CEO of Tiger Asia, is in charge of Arches Cap's operations. And it sparked a portfolio fire sale. The prime traders for it are Goldman Sachs, Morgan Stanley, and Deutsche Bank. Hedge funds use major traders to lend money to structure and conduct the deal.
It is a tough time for its Cap Management family office and staff. And Mr. Hwang and the team decide the right way forward. Lenders asked it to provide more hold. And this is to protect stock swap trades that they had partly funded. It was unable to reach the margin call on Friday. Thus it was forced to wind up more than $20 billion in stock.
The value of those collapsed. The global banks sell vast blocks of shares. It helped them to recoup the money owed to them by the US investment firm.
Nomura and Credit Suisse have taken full advantage of its prime brokers' losses. On Monday, March 29, Nomura warned of a $2 billion loss. And it is subject to changes based on trade undo and share price shift. On the same day, the stock price fell by 16 percent. Meanwhile, Credit Suisse's wipe out $5 billion of market value. The loss to the bank is in the range of $3 billion to $4 billion.
Nomura and Credit Suisse were slower to pull the trigger than Goldman Sachs and Morgan Stanley. They started selling shares on Friday, March 26. as per Reuters, this helped them to avoid having a financial impact. The two banks, however, have yet to make a public comment on the subject. Deutsche Bank has lowered the risk of its Archegos exposure. And that too without incurring any damages. It is currently reducing immaterial remaining client positions. And it does not plan to lose capital on this.
Archegos Capital Management is a private investment firm run by a family. It's a form of a hedge fund that wealthy families build to handle their assets. And they offer related services to family members. It may cover things like tax and real estate strategy. In most cases, family offices are unregulated. The Investment Advisers Act exempts 190 companies. And it advises less than 15 customers from having to file with the US (SEC). Hedge funds are exempt from filing quarterly accounting reporting on their stock holdings.
And this leaves regulators with few options for monitoring systemic risk. And these risks could result in a sell-off like the one saw last week with Archegos Capital. According to market research sources, family offices handled about $6 trillion in assets globally in 2019.