Citadel unwinds over 80% of risk from Situational Awareness portfolio

Ken Griffin said Citadel has unwound more than 80% of the aggregate risk from the portfolio it acquired from Leopold Aschenbrenner’s Situational Awareness hedge fund, marking his first public comments on the transaction.

In a Friday letter to clients obtained by CNBC, Griffin said Citadel conducted more than 100 block trades representing over $4 billion in market value as it reduced exposure from the original portfolio.

Citadel entered discussions with Situational Awareness on July 29 about acquiring some of the fund’s holdings. One day later, CNBC reported that Situational Awareness had been forced to sell all of its public stock positions after suffering steep losses. Citadel was later identified as the buyer.

“A transaction of this magnitude could not have been completed without the extraordinary cooperation of the trading and prime brokerage teams at the banks serving both firms,” Griffin wrote.

Griffin also confirmed that Citadel’s flagship Wellington fund returned 5.94% in July, its strongest monthly performance since 2022, according to CNBC.

Situational Awareness had concentrated its portfolio around the artificial intelligence trade, reflecting Aschenbrenner’s view that AI would fundamentally reshape the economy. The fund also held short positions in software companies expected to face disruption from AI.

Those positions moved sharply against the fund during June and July. Stocks including Sandisk and Bloom Energy, where Situational Awareness held large positions, fell more than 50%, while software companies including Adobe rebounded.

The losses hit both sides of the portfolio and triggered margin calls and compulsory sales.

The AI trade has since rebounded after Citadel acquired the publicly traded assets, with the Situational Awareness liquidation coinciding with the bottom of the selloff that began in June.