Citadel reduced aggregate risk exposure from Leopold Aschenbrenner’s AI-focused hedge fund Situational Awareness by more than 80% through a series of block trades valued at over $4 billion, according to a letter to investors seen by Reuters on Friday.
The risk reduction followed Situational Awareness’ forced unwinding of most of its public equities portfolio last month after heavy losses in technology holdings. Citadel acquired the bulk of the fund’s stock bets before initiating the portfolio transfer. Nearly 100 block trades were executed to trim risk from the acquired positions, marking some of the largest intraday block trades of the year across 10 different names.
Ken Griffin, founder of Citadel, stated that the portfolio reduction was central to the firm’s investment thesis, emphasizing the scale and speed of the risk distribution. Griffin also highlighted the critical role of bank trading and prime brokerage teams in facilitating the transaction, noting that such a transaction could not have been completed without their cooperation.
Citadel’s flagship multi-strategy fund, Citadel Wellington, reported a 5.94% gain in July, bringing its year-to-date performance to 12%. The fund manages approximately $77 billion in assets under management. Griffin and senior lieutenants spent an all-nighter analyzing the trading book positions and liquidity of Situational Awareness’ bets prior to the transaction.
