Brian Moynihan said the hedge fund's fire-sale unwind is pushing major prime brokers, including Bank of America, to reassess risk after years of AI-driven market gains.
Bank of America CEO Brian Moynihan said the near-collapse of AI hedge fund Situational Awareness is a warning for markets lifted by high valuations and leverage (borrowed money). The fund, run by Leopold Aschenbrenner, was forced last week to sell most of its public equities to Citadel in a fire sale after its artificial intelligence bets turned against it. Bank of America, Goldman Sachs and JPMorgan Chase were among its prime brokers (banks that finance and execute trades for hedge funds). Speaking to CNBC's Andrew Ross Sorkin on Wednesday, Moynihan said Bank of America would have been "fine" even without the Citadel deal that gave the fund capital to repay its banks, but added that firms typically review such episodes and may tighten underwriting standards after sharp stock run-ups.