Ripped From the Headlines: the Ripple Effect of a Margin Call

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Hedge funds are back in the headlines as last week saw the dramatic fire sale of around $20 Billion of assets from an unknown seller. Goldman Sachs and Morgan Stanley began unloading enormous packages of stocks, mostly ViacomCBS and Chinese technology companies. Over the weekend, it became clear that these were assets of Archegos Capital, previously a “Tiger Cub” hedge fund that was turned into a Family Office in 2012 after the firm pleaded guilty to a criminal fraud charge. The sale was prompted by sell-offs in the companies in which Archegos had significant concentrated positions, amplified by Total Return Swaps.

 

Knock-on effects

There have been significant knock-on effects from the massive sales:

  • the brokers hedging Archegos’s positions have been forced to sell the underlying stocks, increasing the declines in the share prices of the stocks being sold off
  • there have been knock-on margin calls on other funds holding those stocks
  • massive losses for Credit Suisse and Nomura, as the fund's Prime Brokers
  • declines in the share price of Credit Suisse and Nomura, impacting their shareholders.
  • regulatory investigations into whether Archegos’s banks and brokers colluded inappropriately around deciding how to handle the crisis.

 

Here at IPI, our academic partner is Henley Business School, a top-rated B-School in the UK.  At Henley,  executive education is a key focus – learning shouldn’t stop after you graduate! Together, we focus on bringing practical education to financial services professionals, and so current affairs are very important to us – that’s one of the reasons we always use industry professionals as our lecturers. In our hedge fund certification program, we discuss margin and the ways it is used by Hedge Funds and provided by Prime Brokers. The hedge fund online course features lecturers from Nomura for this part of the curriculum.

If you’re looking for hedge fund education or a hedge fund certification, then the Henley Executive Hedge Fund Program will give you the right blend of academic and practical knowledge to boost your career in finance, keeping you up-to-date with events in the markets and including you in a network of current industry participants.