Citadel Sells 80% of AI Bets After Tech Losses

Ken Griffin’s Citadel has divested over 80% of the positions recently acquired from Leopold Aschenbrenner’s Situational Awareness. This significant offload followed substantial technology holding losses within the AI-focused hedge fund, necessitating a rapid portfolio reduction.

• Citadel executed approximately 100 block trades.
• These trades totaled over $4 billion.
• The transactions included the largest intraday block trades of the year in 10 different stocks.
• Citadel manages around $77 billion in assets.

Situational Awareness, led by former OpenAI researcher Aschenbrenner, transferred most of its stock positions to Citadel last month. The fund experienced significant losses in its technology holdings, compelling the dismantling of a large portion of its public equities portfolio.

Situational Awareness’s Portfolio Contraction

The AI-focused fund’s portfolio faced a severe downturn in July, driven by a selloff in AI stocks. This market movement led to a substantial reduction in its overall valuation.

• Situational Awareness’s portfolio lost 67% of its value in July.
• This compelled the fund to unwind most of its $16 billion public equities book.

Griffin emphasized that Citadel’s ability to distribute this risk was crucial to their investment thesis. He highlighted the firm’s capacity to quickly assess complex risks, deploy capital with speed and conviction, and execute with precision.

Citadel’s Strategic Acquisition and Performance

Investors indicated that Citadel acquired some of the fund’s positions at a discount exceeding 10%, a move that helped stabilize the market during the final two trading days of July. The transaction’s scale required exceptional cooperation from banking teams.

• Citadel Wellington, the firm’s flagship multi-strategy fund, achieved a 5.94% return in July.
• This brought its year-to-date gain to 12%.

Citadel declined to comment on the matter, according to an investor letter seen by Reuters. The firm continues to be recognized for leveraging opportunities arising from market instability.