Citadel buys bulk of Situational Awareness' public stocks

Situational Awareness, a high-profile hedge fund focused on artificial intelligence, has sold the bulk of its public stock portfolio to billionaire Ken Griffin's Citadel after suffering steep losses during a market-wide selloff in AI-related equities. The fund, founded by former OpenAI researcher Leopold Aschenbrenner, was forced to unwind most of its public holdings this week, according to sources familiar with the matter.

In a letter to investors dated July 30, Aschenbrenner acknowledged the fund's portfolio value fell 67% in July. He wrote that the fund experienced a significant drawdown exacerbated by extreme moves in core positions over the past week and came closer to permanent capital impairment than was acceptable. The fund worked to keep the portfolio within its risk parameters, but this became difficult as positions moved against it and market liquidity dried up, the letter stated. Aschenbrenner told investors the hedge fund has removed all leverage from its portfolio.

The deal with Citadel involved the portion of Situational Awareness's public portfolio that was financed by leverage from brokers. The transaction was facilitated by several top Wall Street prime...