Citadel, the hedge fund run by Ken Griffin, has already sold off more than 4 billion dollars worth of a stock portfolio it bought only weeks ago from a distressed rival. Griffin told investors that Citadel has unwound more than 80 percent of the aggregate risk it took on when it acquired the position, moving through nearly 100 separate block trades to do it.
The portfolio originally belonged to Situational Awareness, an artificial intelligence focused hedge fund led by Leopold Aschenbrenner, a former OpenAI researcher. Situational Awareness ran into serious trouble after heavy losses in its technology holdings triggered margin calls the fund could not comfortably absorb, forcing it to unwind the bulk of its public equity positions.
Citadel stepped in as a buyer, opening talks to acquire chunks of that portfolio in late July. The deal let Situational Awareness raise cash quickly to meet its obligations, while giving Citadel a large, ready made block of positions it could then work through on its own schedule rather than assembling from scratch.
In an investor note, Griffin said Citadel has completed close to 100 block trades totaling more than 4 billion dollars in market value as it worked to reduce its exposure to the acquired stocks. The pace and scale of that unwind suggest Citadel treated the purchase less as a long term commitment to Situational Awareness's original bets and more as an opportunistic trade it wanted to work out of relatively quickly.
The episode illustrates how quickly fortunes can turn for even well credentialed hedge funds built around a single high conviction theme, in this case artificial intelligence stocks, and how larger, more diversified firms like Citadel are positioned to absorb and recycle distressed positions when a smaller rival is forced to sell in a hurry.