Wealth management: ‘Real family offices don’t do this kind of thing’
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Wealth management: ‘Real family offices don’t do this kind of thing’

The implosion of Archegos has ripped away the veneer of conservatism and safety that the family office has long enjoyed. It has also emphasized the lack of clarity about what the industry is and its lack of oversight.

New York's 888 7th Ave, a building that reportedly houses Archegos Capital. Photo: Reuters

Every product or industry has its defining moment as it grows. For family offices, that event took place in March 2021 with the spectacular implosion of Bill Hwang’s New York investment house, Archegos Capital Management.

The eye was instinctively drawn to sizeable losses incurred by investment banks including Credit Suisse and Nomura, which fuelled Hwang’s fevered trading activities, by allowing him to take very large undisclosed stock positions.

In the days that followed, Credit Suisse issued regular trading updates, in which it described Archegos as a “significant US-based hedge fund”.

It was fooling no one. Archegos may have acted like a particularly impulsive hedge fund, but in truth it was just a large and very highly geared family office taking incredibly risky bets that backfired.

The chief executive of a global family office calls the bank’s term of choice “disingenuous” and adds: “Clearly, they’d rather no one pointed out the obvious fact that they were extending huge leverage to a single family office.”

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