Archegos case puts financial leverage back at the heart of regulators’ concerns

Posted on Apr 2, 2021 8:45 AMUpdated Apr 2, 2021, 9:31 AM

American supervisors no longer want to be caught off guard. US Treasury Secretary Janet Yellen is on deck following the surprise implosion of Archegos, Bill Hwang’s “family office”. “The pandemic has shown that the indebtedness of some hedge funds can amplify market turbulence,” she said at the first meeting of the Financial Stability Oversight Council (FSOC) under her leadership. One of his first decisions in this role was to relaunch a task force on hedge funds, “so that we can better share data, identify risks and work to strengthen our financial system.”

The signal is strong. A previous working group on the subject was shut down during Donald Trump’s administration. With political alternation, Wall Street will have to deal with more aggressive supervisors. More supervision, less laissez-faire. It must be said that the woes of alternative funds have accumulated in recent months. At the end of January, Melvin Capital found itself in difficulty after being trapped in a “short squeeze” on the GameStop action orchestrated by stock marketers gathered on the Reddit site. The hedge fund could only get out of the rut with the intervention of its peers and an injection of nearly $ 3 billion.

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