Citadel unwinds 80% of Situational Awareness portfolio

Ken Griffin disclosed in a Friday investor letter that Citadel has reduced its exposure from the portfolio it purchased from Leopold Aschenbrenner's Situational Awareness hedge fund by more than 80%. The firm executed more than 100 block trades representing over $4 billion in market value to unwind the positions, according to CNBC.

According to Reuters, Griffin noted in the letter that among the block trades were the year's single-session records in 10 separate names. "Our ability to distribute this risk was central to our investment thesis. These moments highlight our ability to quickly evaluate complex risks, deploy capital with speed and conviction, and execute with precision," Griffin wrote.

Griffin also credited the banks involved in the transaction. "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," he wrote.

According to CNBC, Griffin's letter placed the start of Citadel's talks with Situational Awareness about purchasing assets on July 29. The next day, news broke that Situational Awareness had been compelled to liquidate its entire public equity book in the wake of heavy losses.

Citadel, which manages about $77 billion in assets, declined to comment beyond the letter, according to Reuters. The firm's flagship Wellington multi-strategy fund gained 5.94% in July, leaving it up 12% for the year.

Situational Awareness, which Aschenbrenner launched in July 2024 at the age of 25, concentrated its holdings in companies tied to the physical buildout of AI infrastructure — memory chipmakers, data center operators, and power providers — while simultaneously shorting software companies Aschenbrenner believed would be disrupted by the technology. As a 13F filing showed, Sandisk and Micron Technology together accounted for more than 56% of the fund's disclosed U.S. holdings at the end of June, just before both positions collapsed. Sandisk stock fell nearly 47% in July; Micron stock dropped roughly 29%. The fund also held concentrated positions in Bloom Energy, Taiwan Semiconductor Manufacturing, and Nebius Group, all of which declined sharply in July.

The fund lost roughly $35 billion in assets after margin calls from prime brokers forced a distressed sale of its publicly traded holdings to Citadel. The fund had used as much as 400% leverage and commanded roughly $45 billion at its July high point. The AI trade has rebounded since Citadel took on the assets, with Situational Awareness' liquidation marking a low point for the broader sell-off that started in June.