Citadel acquired the bulk of Situational Awareness’s public stock portfolio on July 30, after the AI-focused hedge fund run by former OpenAI researcher Leopold Aschenbrenner faced heavy tech losses and was forced to unwind its leveraged holdings amidst a severe market selloff.
Situational Awareness, an artificial intelligence-focused hedge fund launched in 2024, sold the majority of its public stock portfolio to Ken Griffin’s Citadel, according to two sources familiar with the matter who spoke to Reuters on Thursday, July 30. The fund, led by former OpenAI researcher Leopold Aschenbrenner, was battered by heavy losses in its technology holdings during a broader market rout.
Leopold Aschenbrenner’s Fund Unwinds Public Portfolio
Situational was forced to unwind most of its public equities portfolio after facing intense pressure to either raise fresh capital from investors or offload its entire book, according to sources who requested anonymity because discussions were confidential. Regulatory filings show the fund held positions in prominent tech names including Broadcom, Intel, and CoreWeave.
Since its launch in 2024, Aschenbrenner attracted a cult-like following among investors due to prescient bets on the AI sector. Those positions propelled the fund to a 439% return from the start of the year until the end of June. However, Citadel stepped in to pick up the portion of Situational’s public portfolio that was financed by leverage from brokers.
Wall Street Prime Brokers Facilitate Deal With Citadel
A number of top Wall Street prime brokers helped facilitate the deal between Citadel and Aschenbrenner’s fund, according to sources. The participating institutions include Goldman Sachs, JPMorgan Chase, Bank of America, and Citigroup.
Ken Griffin’s Citadel manages about $71 billion in assets and ranks among the world’s largest and most profitable hedge funds. Following the transaction, Situational will hold a book of roughly $10 billion, comprising remaining stocks as well as private investments. Sources confirmed that Situational has not sold its stake in private AI developer Anthropic.
Broad AI Market Selloff Pressures Global Hedge Funds
The transaction comes as global hedge funds grapple with their biggest monthly drawdown on record, driven by an across-the-board rout in artificial intelligence stocks that has erased much of the gains from crowded sector bets. Asia-focused fundamental long-short funds fell 18.6% on average through July 28, according to a Goldman Sachs prime brokerage note sent to clients. Morgan Stanley’s prime brokerage unit reported in a Wednesday note that stock-picking hedge funds rushed to unwind AI positions by covering short positions and selling long positions in relatively equal amounts.
Hedge funds frequently utilize large amounts of leverage to amplify returns, but those bets can backfire when markets move against them, triggering margin calls from prime brokers. That dynamic can create a vicious cycle where margin calls force asset sales, extending market downturns. Sources noted it remains unclear whether Aschenbrenner’s fund faced margin calls from lenders prior to reaching the agreement with Citadel.
Backers and Future Book Scale at Situational Awareness
Before scaling down its public book, Situational managed about $20 billion in assets and employed roughly 20 people. Like many of its peers, the fund used leverage to boost its positions. Aschenbrenner’s initial market success drew backing from prominent investors, including secretive trading giant Jane Street, Stripe co-founders Patrick and John Collison, and Meta Platforms executives Daniel Gross and Nat Friedman. The Wall Street Journal first reported the transaction between Citadel and Situational on Thursday, July 30.
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