Hedge fund giant Citadel on Thursday purchased a distressed portion of AI protege hedge fund Situational Awareness. The move sent a bullish shock through the U.S. stock market and was broadly credited with triggering Friday's positive market action. Situational Awareness, run by former OpenAI employee Leopold Aschenbrenner, had swelled to more than $20 billion in ***** ets in the two years since its founding.
That ramp up required heavy leverage, funded by banks. And as artificial intelligence-related stocks came under recent pressure, Situational Awareness could not keep up with margin calls forcing it to raise cash. Reuters reported that the California-based fund lost 67% of its value in July, after selling $16 billion of its public portfolio.
Citadel founder and fund manager Ken Griffin has made a long-term strategy of digging diamonds out of ash. Citadel made similarly aggressive moves during Enron's bankruptcy in 2001, during the meltdown of hedge fund Sowood Capital as the Great Recession took hold in 2007, and in propping up hedge fund Melvin Capital in 2021 as meme stock investors piled in against the firm's short bet on GameStop (GME).
"During market stress, the collective judgment of our business leaders, risk managers and portfolio managers enables us to capitalize on market opportunities when others, who depend on simplistic stop-loss approaches, cannot," Griffin wrote in a 2023 letter, as reported by Reuters.
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That ramp up required heavy leverage, funded by banks. And as artificial intelligence-related stocks came under recent pressure, Situational Awareness could not keep up with margin calls forcing it to raise cash. Reuters reported that the California-based fund lost 67% of its value in July, after selling $16 billion of its public portfolio.
Citadel founder and fund manager Ken Griffin has made a long-term strategy of digging diamonds out of ash. Citadel made similarly aggressive moves during Enron's bankruptcy in 2001, during the meltdown of hedge fund Sowood Capital as the Great Recession took hold in 2007, and in propping up hedge fund Melvin Capital in 2021 as meme stock investors piled in against the firm's short bet on GameStop (GME).
"During market stress, the collective judgment of our business leaders, risk managers and portfolio managers enables us to capitalize on market opportunities when others, who depend on simplistic stop-loss approaches, cannot," Griffin wrote in a 2023 letter, as reported by Reuters.
#market
1 day ago
