Like given the fund went from $10-15bn to ~$0 in like a week, without a major event or liquidity crisis, I would probably say it was overly levered?
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Article seems to be wrong on several major points? • "The fund was not overly levered" • "Its risk was not hidden" • "Hwang typically ran dollar-neutral portfolios" • "Analysts had full insight into Archegos’ ... position sizes"https://www.bloomberg.com/opinion/articles/2021-03-30/wall-street-archegos-collapse-is-business-as-usual-not-a-disaster …
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There is a *massive* difference between a quant equity book (carefully hedged to sector, country and factor exposures) which can run 10-15x leverage and still be pretty low volatility vs. levered 5x long in concentrated shitcos "hedged" with index futures
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This is particularly awful. If you have a concentrated long book in stocks which are broadly all in the same sector, and you hedge that with index futures ... that is a bad hedge! You are taking a fuckload of risk if you do that!pic.twitter.com/zeyB2xxGKE
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Like sure, yeah, it was dollar neutral but nobody should’ve underwritten the basis risk inherent in concentrated long/short index portfolio at that kind of leverage.
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Certainly seems at odds with a lot of the chatter (granted, it's chatter) that suggested the "$50-100bn" was LMV and the book was very much not dollar-neutral.
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"These analysts had full insight into Archegos’ capital position, position sizes, risk management, processes, strategy and other factors." If this was true, why would the PBs need to have a joint call to unwind the positions (as reported by Bloomberg)?
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If he had the same leverage and portfolio on $50mm he probably wouldn’t have blown up. Seemed to me more concentration/liquidity and counter-party risk.
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Was he not running a dollar neutral portfolio?
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Can’t find the numbers right now but reports seem to suggest he wasn’t
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