CREDIT Suisse, the Swiss investment bank with 7000 London staff, was back in the mire today after warning that its exposure to a collapsing US hedge fund would have a “highly significant” impact.
Archegos Capital Management has been forced to ditch assets apace leading to margin calls – demands for cash – from its bankers.
Japan’s Nomura also admitted it is facing a “significant loss” at its US arm due to the Archegos issue, which is likely to expand this week as the extent of its troubles become clearer.
Archegos raced to a fire sale of its assets last Friday as some of its key holdings, in particular media giant ViacomCBS, tumbled. Archegos manages the wealth of Bill Hwang, alumnus of Julian Robertson, the hedge fund king behind Tiger Management.
Credit Suisse, still recovering from a spying scandal that led to the departure of CEO Tidjane Thiam, said: “A significant US-based hedge fund defaulted on margin calls made last week by Credit Suisse and certain other banks. Following the failure of the fund to meet these margin commitments, Credit Suisse and a number of other banks are in the process of exiting these positions.”
CS shares fell 10%. In Tokyo, Nomura shares fell 16% after it admitted that an “event” on March 26 left it exposed.
Nomura said it is “evaluating the extent of the possible loss”. Credit Suisse said it is “premature to quantify the exact size of the loss…(but) it could be highly significant”.
Credit Suisse was already facing a hit due to its exposure to Greensill, the now insolvent lender that boasted David Cameron as an adviser.
The troubles facing Credit Suisse present an immediate headache to outgoing Lloyds Bank CEO Antonio Horta-Osorio, who arrives as CS chairman shortly.
A margin call is when a broker demands that an investor deposits more money into an account to demonstrate its financial strength. The investor then has to find cash, or sell assets.
Archegos is a secretive fund, exempt from normal financial disclosures given its status as a family office.
In 2018 Hwang said investing is not “all about money”, and that “God certainly has a long-term view”.
