Understanding the Collapse of Archegos Capital Management

Archegos Capital Management was a hedge fund founded by Bill Hwang in 2013. It was known for its high-risk, high-reward investment strategy.

The fund's collapse was a result of a combination of factors, including a massive bet on several stocks, including ViacomCBS and Discovery.

Archegos' leverage was reportedly around 25 times its capital, making it highly vulnerable to market fluctuations.

This leverage, combined with a decline in the value of the stocks in its portfolio, led to a sharp increase in margin calls, which the fund struggled to meet.

The Collapse of Archegos Capital Management was a major financial event that left several global banks nursing significant losses.

Credit Suisse took a massive hit of 5 billion Swiss francs ($5.5 billion), which is a staggering amount that's hard to wrap your head around.

The collapse was triggered by Archegos's failure to meet a margin call in March, which led to a fire sale of assets and a subsequent flood of shares into the market.

This caused lower returns for investment banks that were trying to unwind the hedge fund's position and recoup their losses.

Archegos Capital Management's timeline of events is a complex and multifaceted one.

The company was founded in 2002 by Bill Hwang, a former hedge fund manager.

In 2020, Archegos began to amass a large position in ViacomCBS, a media conglomerate that included CBS, MTV, and Paramount Pictures.

Archegos' leverage was estimated to be around 20 to 1, meaning for every dollar of equity, the company had borrowed $20.

This leverage, combined with a sharp decline in the value of ViacomCBS' shares in March 2021, led to a significant margin call, which Archegos was unable to meet.

March 2021 was a tough month for many people. The COVID-19 pandemic was still raging, and the world was dealing with the aftermath of the January 6th insurrection at the US Capitol.

The US reported over 1 million new cases of COVID-19 in March 2021, a staggering number that highlighted the ongoing struggle to contain the virus.

The global economy was also feeling the pinch, with the International Monetary Fund (IMF) estimating a 3.5% decline in global GDP for 2021.

The US government announced a $1.9 trillion stimulus package to help alleviate the economic pain, but it faced opposition from some lawmakers.

The US reported over 45,000 COVID-19 deaths in March 2021, a grim reminder of the virus's deadly toll.

The SEC issued a statement in response to the summer 2022 market volatility, citing concerns over market manipulation and potential insider trading.

The agency's statement highlighted the importance of maintaining a fair and orderly market, with SEC Chair Gary Gensler emphasizing the need for greater transparency and accountability.

The SEC also announced plans to increase surveillance and monitoring of market activity, with a focus on detecting and preventing potential market manipulation schemes.

Market participants were given a deadline to report any suspicious activity to the SEC, with the agency promising to take swift action against any individuals or firms found to be engaging in illicit behavior.

The SEC's response to the summer 2022 market volatility was seen as a key move to restore confidence in the markets and maintain investor trust.

The agency's actions were widely seen as a positive step towards promoting a fair and transparent market environment.