Archegos: Nomura cuts ties with hedge funds in Europe and the United States

Posted on Jul 6, 2021 at 10:20 PM

The shock wave of Archegos continues to shake the big investment banks. The Japanese Nomura has decided to end a large part of its activities for hedge funds in the United States and Europe, says Bloomberg of sources familiar with the matter. These cuts result from significant losses linked to the collapse of the American family office Archegos Capital Management, created by former hedge fund manager Bill Hwang.

Nomura’s withdrawal concerns the cash part of its prime brokerage. The latter consists of financing lending securities and cash to hedge funds to finance their leveraged transactions in exchange for collateral and to execute their transactions. Prime brokerage is very lucrative, but also very risky.

Strategic setback

Frontline like Credit Suisse, which lost 4.4 billion Swiss francs in the affair, Nomura charged nearly $ 3 billion when Archegos suddenly collapsed at the end of March. Rumors of dark cuts in prime brokerage of the first Japanese broker began to circulate soon after, the bank having decided to reduce the risk in this unit first.

Nomura has already informed the regulators of the jurisdictions concerned by its withdrawal into prime brokerage, and some of its clients. She gives them about six months to find a new partner, according to Bloomberg. The Japanese bank did not comment.

Its decision is a setback for its managing director Kentaro Okuda who wanted to strongly develop its activities in the United States, to break its dependence on a stagnant Japanese market. At this stage, there would be no change in Nomura’s prime brokerage activity in Asia, including Japan.

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