How Bill Hwang Reached a $10 Billion Net Worth
In March 2021, two names — Bill Hwang and Archegos Capital Management — made headlines in leading media. The man who was once worth over $30 billion had lost $20 billion in two days, leaving Bill Hwang’s net worth at $10 billion. Family-owned Archegos Capital Management had defaulted on loans Hwang had used to build its portfolio, resulting in one of its largest margin calls. A margin call is when a broker asks an investor to put up more securities to cover potential losses; Thus, Hwang’s company was forced into liquidation. While the loss of money was shocking, the public wondered why Hwang’s net worth was $10 billion despite living modestly. Below are details of how he acquired the wealth.
A little boy lands in the land of opportunity
According to Business Standard, the story of Hwang begins in South Korea. His birth name was Sung Kook Hwang. He was born of Christian parents; his father was a pastor and his mother a missionary. The family moved to Las Vegas, where Hwang, who spoke or wrote little English, became a student while his father got a job pastoring at a local church. Unfortunately, Hwang’s father died shortly after immigrating, prompting the widowed mother to move to Los Angeles. As a teenager, Hwang worked as a chef at McDonald’s, which allowed him to improve his English. After graduating from high school, the teenager went to the University of California, Los Angeles (UCLA) to study economics. Though caught up in the excitement of the institution in the distracting neighborhoods of Hollywood, Beverly Hills, and Santa Monica, Hwang still managed to graduate and earn his master’s degree in business administration from Carnegie Mellon University.
Hwang crosses paths with Julian Robertson
Armed with his master’s degree, in 1996 Hwang landed a job at Hyundai Securities America, a Korean brokerage firm that had established a branch in New York. He was a stock seller for six years before moving to Hong Kong to work for Peregrine Investment Holdings. While working at Peregrine, he met a client, Julian Robertson, who would change Hwang’s life for the better. According to the Korean Herald, Hwang played a pivotal role in introducing Robertson to the Korean market in the 1990s. While other Wall Street investors were reluctant to invest in East Asia, Hwang Robertson advised investing in Korean stocks. Robertson saw the potential in the ambitious Hwang and brought the South Korean-born equity salesman to Tiger Management, a hedge fund Robertson founded in 1980. Thanks to Hwang’s advice, Tiger Management earned a $555 million cash return within months after investing a 6.6% stake in SK Telecom in 1999. In 2000, Robertson closed the hedge fund to outside investors and helped Hwang to set up his own fund, Tiger Asia Management, to focus on Asian equities. The hedge fund went on to become one of the largest focused on Asian markets, and the investment grew from just over $1 billion to a valuation of $5 billion. By 2007, Hwang was managing $8 billion for outside investors, and Robertson was so grateful he threw a party in Hwang’s honor.
Making the most of any opportunities he finds
Everything collapsed in 2008 when Lehman Brothers filed for bankruptcy and Tiger Asia Management lost a significant sum of money. He had also bet against Volkswagen by shorting the shares. Unfortunately, Volkswagen stock rose after a brief squeeze from Porsche that briefly made Volkswagen the most valuable company in the world. Consequently, investors had to pay over $1,000 per share. Before he could recover, Hwang took another hit at his hedge fund after Hong Kong regulators accused him of insider trading while investing in Chinese stocks. US securities regulators conducted their own investigations into insider trading, and in 2012 Hwang agreed to a civil settlement and was fined $44 million. Tiger Asia Management was not spared; After pleading guilty to insider trading, it had to return money to investors. As a result, Hwang was banned from managing public funds for five years. He returned to the drawing board and used the rest of the money, about $500 million, to open an office in Manhattan and Archegos Capital Management was born. Unable to handle public funds, Hwang chose to trade on the US stock exchange as he was also banned from trading in Hong Kong for four years. The office functioned much like a hedge fund, according to The New York Times. However, Hwang made sure the fortune included his own fortune and that of a few family members.
His investment strategies are paying off
According to Forbes, one of the first investments Hwang made was in Netflix stock, which has increased in value tenfold since 2013. Even when Carl Icahn, one of the largest shareholders, sold his stake within two years of acquiring Netflix stock, Hwang stuck by his. Maybe he had learned his lesson from his blunder with Volkswagen stock. Knowing technology was the way to go, he continued to invest most of his wealth in other companies, such as LinkedIn and Amazon stock. The investor also founded a charity in 2006, The Grace and Mercy Foundation. As Forbes tells us, Hwang donated nearly $500 million worth of his Facebook, Amazon, Expedia, and Netflix stock to the charity. The foundation then sold the shares contributed by Hwang days after receiving them. For example, Hwang bought Amazon stock for $186 in 2011, but he brought them in in December 2018, allowing the nonprofit to sell the shares for $1,478 each. Donations are an ideal means of reducing the tax burden through tax deductions. Banks like Morgan Stanley and Goldman were once afraid to lend to Hwang after the insider trading allegations, but they began to be generous. As a result, Hwang’s portfolio grew to $100 billion, leveraged his shares fivefold, which should have been a red flag to banks. While it may seem like a shady move by a man proclaiming himself a true believer, it’s not surprising. In an interview with FULLER Studio, Hwang said that God also has a long-term view and capitalism is designed to help people move forward. Hence, thanks to his capitalist approach, Hwang amassed billions in assets so that even after his fall from grace, he still had $10 billion to cushion him.