Situational Awareness unwinds public stock portfolio after AI-stock losses trigger margin pressure

Situational Awareness, the hedge fund founded by Leopold Aschenbrenner, sold most of its public stock portfolio to Citadel after a sharp AI-stock downturn and heavy leverage triggered margin pressure and a forced unwind. Reuters reported that the fund’s public equities book had been about $16 billion and that Citadel bought a chunk of it by Thursday after the portfolio lost 67% of its value in July. The new account adds detail on Citadel’s intervention. Amid concerns on Wall Street that at least one firm was in trouble, Ken Griffin assembled senior executives including co-Chief Investment Officer Pablo Salame, Chief Operating Officer Gerald Beeson, Perry Vais and Chief Legal Officer Shawn Fagan to assess Situational Awareness’ positions and liquidity. Griffin also spoke directly with Aschenbrenner, a former OpenAI researcher, as Citadel analyzed the fund’s book overnight. The rescue fits a pattern that Reuters traced across earlier market dislocations. Citadel previously took over assets or provided financing tied to Enron traders in 2001, Sowood Capital and Amaranth Advisors during the 2007 credit turmoil, and Melvin Capital in 2021 alongside Point72. Griffin has said the firm’s risk culture allows it to capitalize during market stress when others relying on rigid stop-loss approaches cannot. Earlier reporting said the fund had managed close to $45 billion at its peak, was leveraged roughly three to four times on concentrated AI infrastructure bets, and saw assets fall to about $10 billion after the unwind. Aschenbrenner told investors the fund was down 67% on the month but still up 80% on the year, had eliminated its shorts and leverage, and would continue operating rather than shut down.