Bill Hwang: Pioneer of Wall Street's Asia investing and culprit behind Archegos blowup

Bill Hwang, the Korean American trader behind US market unrest involving lossmaking trades of New York-based Archegos Capital Management, was said to be one of the first Wall Street trailblazers in equity investing in East Asia including South Korea, until his fall from grace.

The South Korean-born hedge fund trader is said to have played a role in bringing his mentor and investment guru Julian Robertson’s attention to the crisis-battered East Asian market in the late 1990s, including his home country, which had drawn meager attention from Wall Street investors then.

“(Hwang) advised Robertson to invest in Korean equities and got him into the Korean market,” a source told The Korea Herald on condition of anonymity on Tuesday.

Moving to the US after high school, Hwang started his finance career as a stock salesperson in New York and Hong Kong in early 1990s. Earning a Master’s degree at Carnegie Mellon University, he joined Hyundai Securities America, a New York unit of the Korean brokerage that later merged into KB Securities. Hwang then moved to Hong Kong to work at the now-defunct Peregrine Investment Holdings.

He made a quantum leap in his career after an encounter in Hong Kong with Robertson, who founded Tiger Management in 1980, and called Hwang the “best salesman” in a 2006 interview.

As Robertson’s protege, he then started his hedge fund career at Tiger Management.

Tiger’s focus on the Korean market -- perceived as offering a buying opportunity as its stock market hit a trough – included some high-profile trades, including a 1999 investment in a 6.6 percent stake in SK Telecom. The deal, made via an American depositary receipt, brought a 630 billion won ($555 million) cash return within months through shareholder activism.

Over the course of Tiger’s growth in the Asian market, Robertson backed Tiger’s Asian arm and let Hwang take the lead role in 2001. Tiger Asia Management’s open investments in Korean stocks included G II R and Hanmi Science, filings showed.

As the son of a church pastor and a missionary in Mexico, the devout Christian is known to exercise restraint when it comes to his personal life, and does not drink or smoke. He had also reportedly established nonprofit foundations dedicated to the publication and distribution of audio bibles.

But Hwang found himself virtually blacklisted by Wall Street investment banks after he pleaded guilty to insider trading by short selling a Chinese bank stock using confidential information. In 2012, he paid $44 million to settle the charge brought against him by the US Securities and Exchange Commission.

Hwang had sought to make a comeback with Archegos, a family office he founded in 2013.

As a family office, largely subject to looser filing obligations than hedge funds, Hwang turned to covert derivative products including contract-for-differences and swaps that are privately tradable off-exchange. They allowed Hwang to amass exposure to stocks of publicly traded companies by partnering with prime brokers, without actually owning their stocks.

Afrer US investment banks Goldman Sachs and Morgan Stanley last week forced Hwang’s firm to carry out block deals and liquidate its position built through highly leveraged investments, other prime brokers including Nomura and Credit Suisse were forced to disclose that they now face a potential significant loss from their exposure to Archegos.

The moves, involving the reported liquidation of $30 billion of investments, have led to a steep selloff of Baidu, ViacomCBS, among other stocks last week.

By Son Ji-hyoung (consnow@heraldcorp.com)