Kicked out of Hong Kong and the hedge fund game, Bill Hwang plowed his $500 million net worth into a concentrated portfolio of U.S. internet stocks, like Netflix and Amazon, while shorting Under Armour, to become a trading force.
But how did Hwang amass a $10 billion fortune that he could use as collateral for his total return swap positions in the first place? The answer is that in the years after he closed his hedge fund, Hwang went on an incredibly successful trading run. He compounded his personal wealth at enormously high rates of return by investing in a few high-flying U.S. internet stocks, like Netflix, LinkedIn and Amazon, and holding onto them, a person familiar with Archegos’ operations says.
But the Grace and Mercy Foundation tax records also provide a window into what Bill Hwang has been up to in his family office. In 2017 and 2016, Hwang contributed $210 million of Netflix stock to the foundation, and between 2015 and 2018 he contributed $236 million of Amazon stock, tax records show. He also donated another $48 million of Expedia and Facebook stock.
The other result of using swaps was that Hwang built a concentrated portfolio without any other traders knowing what he was doing. Institutional investors, including family offices, must file quarterly 13F reports of their U.S. stock holdings if they total more than $100 million. But there is no sign of Archegos filing any 13Fs with the Securities & Exchange Commission.
But as Archegos grew in size, it became a very lucrative client for investment banks and they decided to embrace Hwang again. They even vied for his business. He paid them fees for the total return swaps and continued to further leverage his positions, which expanded to include Chinese technology stocks listed in the U.S. Hwang’s stock picks were incredibly accurate and right over the last nine years.
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