By Reuters
Ken Griffin’s firm acquires part of troubled fund’s portfolio after AI stock sell-off wipes out 67% of its value in July.
Citadel, the investment firm founded by billionaire Ken Griffin, has stepped in to acquire part of the portfolio of hedge fund Situational Awareness after the firm suffered major losses from investments tied to artificial intelligence stocks, according to people familiar with the matter.
The move marks another high-profile intervention by Citadel during a period of market stress, as Griffin’s firm has previously taken positions in troubled financial situations involving struggling hedge funds.
Situational Awareness, founded by former OpenAI researcher Leopold Aschenbrenner, saw its portfolio lose 67% of its value in July following a sharp sell-off in AI-related stocks. The losses forced the fund to unwind most of its $16 billion public equities portfolio.
How did Citadel respond to Situational Awareness losses?
According to sources familiar with the matter, Griffin and senior Citadel executives reviewed Situational Awareness’ trading positions and liquidity risks before reaching an agreement.
Citadel executives, including Co-Chief Investment Officer Pablo Salame, Chief Operating Officer Gerald Beeson, equity quantitative research head Perry Vais, and Chief Legal Officer Shawn Fagan, worked through the fund’s portfolio analysis before Citadel purchased a portion of its holdings.
Aschenbrenner acknowledged the losses in a letter to investors, writing: “We let you down.”
Citadel and Situational Awareness declined to comment on the deal.
Why is Citadel known for buying troubled assets?
The Situational Awareness deal follows a long-standing strategy by Citadel of seeking opportunities during periods of market turmoil.
Citadel previously acquired assets linked to failed hedge funds, including Sowood Capital during the 2007 financial crisis and Amaranth Advisors after its collapse following large losses in natural gas trading.
In 2021, Citadel, along with Point72 Asset Management, invested $2.75 billion into hedge fund Melvin Capital after it suffered losses during the GameStop trading turmoil.
Griffin has said Citadel focuses on identifying opportunities during market stress by assessing risks and acting when other investors are forced to exit positions.
Who is Ken Griffin?
Ken Griffin founded Citadel in 1990 and built it into one of the world’s largest hedge funds, managing tens of billions of dollars in assets.
He also co-founded Citadel Securities, a major global market-making firm.
Griffin has emphasized risk management as a key part of Citadel’s investment approach, saying investors should assess whether potential losses remain manageable under worst-case scenarios.
The latest deal highlights growing volatility in the artificial intelligence investment sector, where rapid gains in recent years have been followed by increased scrutiny over valuations and market risks.