Are there more Archegos Capital Managements out there? That is to say, are there more obscure investment firms, making highly concentrated bets using vast quantities of borrowed money, that can fail suddenly and inflict multi-billion losses on some of the world’s biggest banks?
Markets were calmer than expected on Monday and, for now, the theory that Archegos is a one-off is intact. But let’s see what the next few weeks brings as every big investment bank in the world checks its hedge fund exposures. Stock markets are displaying pockets of extreme valuations, at least by historical standards. If some banks’ risk-control departments have been asleep, there is potential for trouble.