When rival hedge funds face catastrophic losses, billionaire investor Ken Griffin has a habit of identifying opportunities and showing up with a checkbook. Citadel’s founder last week reprised his role as one of Wall Street’s rescue buyers, stepping in to salvage California hedge fund Situational Awareness as it buckled under souring bets on artificial intelligence (AI) stocks.
Amid market rumblings that at least one firm was in trouble, Griffin, 57, assembled his top lieutenants to investigate, five people with knowledge of the matter said.
By Wednesday morning, Citadel executives had reached out to Situational Awareness, and Griffin spoke directly with Leopold Aschenbrenner, the fund’s young founder and a former OpenAI researcher.
Photo: Reuters
Together with Citadel co-chief investment officer Pablo Salame, chief operating officer Gerald Beeson, Perry Vais, its head of equity quantitative research, and chief legal officer Shawn Fagan, Griffin pulled an all-nighter to analyze the trading book positions of Situational Awareness and how liquid the bets were, the sources said. After a selloff in AI stocks, the Situational Awareness portfolio lost 67 percent of its value last month, and the fund was forced to unwind most of its US$16 billion public equities book. By Thursday, Citadel had bought a chunk of its book.
“We let you down,” Aschenbrenner wrote to his investors in a letter seen by Reuters.
“We worked to keep the portfolio within our risk parameters, but gradually this became more difficult as positions rapidly moved against us and market liquidity dried up,” Aschenbrenner wrote in a letter to investors on late Thursday. “I take full responsibility for these events,” he said. “We took the steps that were necessary to fight another day.”
Word spread quickly on Wall Street that Citadel, one of the world’s largest hedge funds which prides itself on disciplined risk-taking and seizing market opportunities, had stepped in. Forbes estimates Griffin’s personal fortune at about US$52 billion.
“There are only a few firms that could take down this much risk,” one investor familiar with the situation said.
It was a familiar Citadel play, and one that Griffin has refined over the decades: see a firm in distress, swoop in fast, snag a great deal.
“Citadel isn’t acting as a white knight — it’s making calculated investments,” said Bruno Schneller, managing partner at multifamily office Erlen Capital Management AG. “Whether you describe that as being a savior or a vulture probably depends on your perspective, but it’s better understood as a sophisticated provider of crisis capital than either.”
Reuters could not ascertain how much money Citadel had made on the deal, although many AI stocks in the portfolio have risen since.
Representatives for Citadel and Situational Awareness declined to comment.
Additional reporting by Bloomberg
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