Re:Credit Suisse Takes $4.7B Hit on Archegos Meltdown
by tootie on Tuesday April 06, 2021 @09:57AM
(#26711796)
I don't work in hedge funds and have only a superficial understanding, but it seems the operative word of "hedge" was completely ignore here. He plowed a huge chunk of his positions into two companies and didn't offset with any swaps or other risk absorbers. This seems like downright malpractice and not just a bad luck.
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Re:Credit Suisse Takes $4.7B Hit on Archegos Meltdown
by bidirectional on Tuesday April 06, 2021 @10:28AM
(#26712160)
Eh, all is fair in love and war. The bank are charging a risk premium on any transactions with him, it's their fault if they underestimate it. It's a family office, not a hedge fund taking outsider capital, so he's entering into transactions with willing counterparties using his own money.
Re:Credit Suisse Takes $4.7B Hit on Archegos Meltdown
by dcolkitt on Tuesday April 06, 2021 @12:55PM
(#26714290)
Archegos was hedged. All of its long positions were matched with short index futures, and the fund was running at or near market neutral.
Hedging doesn't mean zero risk. It just means removing the risk of whatever it is being hedged. In this case it wasn't a general market decline that took out Archegos. It was a decline in the specific basket of stocks they were holding relative to the broader market.