Archegos Capital
In March 2021, family office Archegos Capital collapsed, causing banks over $10 billion in losses. Learn how total return swaps hid its leverage and the lessons.
Archegos Capital Management was the family office of Bill Hwang, a former hedge fund manager. As a family office managing its own money, it faced lighter disclosure rules than a hedge fund. Using total return swaps with several banks, Archegos built enormous, concentrated, leveraged positions in a small number of stocks. When some of those stocks fell sharply in late March 2021, it could not meet margin calls. The banks dumped its positions, and some lost billions. Credit Suisse alone lost about $5.5 billion, a blow that contributed to the bank's later troubles.
How Archegos built its positions#
| Feature | Detail |
|---|---|
| Instrument | Total return swaps: banks bought the shares and passed the returns to Archegos for a fee. See Swaps Explained |
| Leverage | Estimated at several times its capital, with gross exposure reported at over $100 billion at its peak |
| Concentration | Huge stakes in a handful of stocks, including ViacomCBS, Discovery and several Chinese technology companies. See Concentration Risk |
| Secrecy | Because the banks legally owned the shares, Archegos did not need to disclose large stakes publicly, and each bank saw only its own exposure. See Position Limits and Regulatory Reporting |
The collapse#
| Date (2021) | Event |
|---|---|
| 22 March | ViacomCBS announces a share sale to raise about $3 billion; its stock starts falling from record highs |
| 23 to 25 March | The stock keeps falling; Archegos faces margin calls it cannot meet |
| 25 March | Banks meet with Archegos to discuss an orderly wind down; no agreement holds |
| 26 March | Some banks sell large blocks of Archegos related shares; prices of affected stocks fall sharply |
| Following days | Banks that sold later or slowly report large losses |
Why risk controls failed#
| Failure | Explanation |
|---|---|
| Fragmented visibility | No single bank knew Archegos's total positions |
| Weak margin terms | Some banks set low margin or allowed it to fall as positions grew. See Margin Financing |
| Concentration ignored | Huge exposure to a few stocks with limited liquidity |
| Client profile | Hwang had a past regulatory settlement; some banks still extended substantial credit |
| Profitable client | Large fees encouraged banks to accommodate the business. See Prime Brokerage |
Aftermath#
- Credit Suisse commissioned an independent report that found serious failures in risk management and oversight. The bank's problems, including Archegos and other scandals, contributed to its emergency takeover by UBS in March 2023.
- Bill Hwang was charged with fraud and racketeering, accused of manipulating stock prices and misleading banks. He was convicted in July 2024 and sentenced to 18 years in prison in November 2024.
- Regulators proposed and adopted more disclosure for large security based swap positions and closer scrutiny of prime brokerage risk.
Lessons#
- Leverage hidden in derivatives is still leverage. See Leverage.
- Concentrated positions in a few names can unravel fast. See Diversification.
- Counterparties need the full picture; fragmented exposure hides total risk. See Market, Credit and Counterparty Risk.
- In a fire sale, the first sellers suffer least.
- Fees from a profitable client can blind firms to risk.
Frequently asked questions#
What was Archegos Capital?#
The family office of Bill Hwang, which used total return swaps to build large, leveraged and concentrated stock positions before collapsing in March 2021.
How did Archegos hide its positions?#
Through total return swaps, where banks owned the shares, so Archegos did not have to disclose large stakes and each bank saw only part of its exposure.
How much did banks lose from Archegos?#
Total losses exceeded $10 billion, including about $5.5 billion at Credit Suisse and about $2.9 billion at Nomura.
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Mentioned in
- Amaranth AdvisorsMarket History
- Lessons From Market FailuresMarket History
- Prime BrokersMarket Structure