Situational Awareness losses driven by crowded AI trades, not short-seller attack, says S3
The sharp losses suffered by AI-focused hedge fund Situational Awareness were driven by concentrated, leveraged positions in crowded trades rather than a coordinated assault by short sellers, according to a report by Bloomberg citing analytics firm S3 Partners.
Ken Griffin, billionaire investor and founder of Citadel, has stepped in to rescue California hedge fund Situational Awareness amid its losses in AI stocks. Citadel's founder and CEO assembled his top executives to investigate the fund's situation, which lost 67% of its value in July after a selloff in AI stocks. The fund's portfolio had to be unwound, with most of its $16 billion public equities book liquidated.
Griffin, 57, reached out to Situational Awareness and spoke directly with the young founder, Leopold Aschenbrenner. They conducted an all-night analysis of the fund's trading book positions and liquid bets. After the investigation, Citadel bought a chunk of Situational Awareness' book, with Aschenbrenner writing to his investors, "We let you down."
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