Situational Awareness hedge fund sells AI stock portfolio to Citadel
Reports say the AI-focused fund’s assets fell from $45 billion to $10 billion after a sharp pullback in AI stocks.
By James Whitfield · Staff Writer
3 min read
The Situational Awareness hedge fund has sold the bulk of, or possibly all of, its public stock holdings to Ken Griffin’s Citadel after a difficult stretch for AI shares, according to multiple reports. The sale matters because the AI-focused fund’s reported asset drop would rank among the largest trading losses on record if the figures are confirmed.
Reuters reported that Citadel bought most of Situational Awareness’ stock holdings. Axios described the sale as covering the fund’s entire public stock portfolio, while Bloomberg, CNBC and The Wall Street Journal also reported on the fund’s steep losses and the Citadel transaction.
Situational Awareness was started by a 24-year-old former OpenAI employee and centered its strategy on artificial intelligence investments, according to The Verge. Its setback comes after several weak weeks for AI-related stocks, The Verge reported.
What happened to Situational Awareness?
CNBC reported that Situational Awareness was valued at $45 billion at the beginning of July. Bloomberg reported that, after the sale of assets to Citadel, the fund’s assets had fallen to $10 billion.
Those figures imply a decline of about $35 billion during July, though the exact size of the loss depends on the final accounting of the Citadel sale and the fund’s remaining assets. The reports did not provide a full public breakdown of which securities were sold or how the losses were realized.
A public stock portfolio is the set of listed company shares a fund owns and can buy or sell in the market. For readers who want the basics of how those trades become market prices, News.cx has an explainer on how the stock market works.
How does this compare with Archegos?
The Wall Street Journal has reported that Archegos Capital Management lost $8 billion in 10 days in 2021, a collapse widely cited as the prior benchmark for a trading loss. The Verge noted that, if the reported Situational Awareness figures hold, the AI-focused fund’s losses would be about three times larger.
Archegos’ failure drew attention because rapid losses at a concentrated investment vehicle spilled into major banks that had financed its trades. The reports on Situational Awareness, by contrast, center on the fund’s own AI stock exposure and the transfer of its public equities to Citadel.
Who bought the portfolio?
Citadel, the hedge fund firm founded by Ken Griffin, bought the holdings, according to Reuters and other outlets. The reports did not disclose full transaction terms.
The sale gives Citadel control of at least most of the positions that Situational Awareness had held in public equities, based on Reuters’ account. Axios’ account went further, reporting that the full public stock portfolio was sold.
The conflicting descriptions leave one key point unresolved: whether Situational Awareness retained any public stock holdings after the deal. What the reports agree on is that the fund sharply reduced its exposure following losses tied to AI stocks.
This story draws on original reporting from The Verge.