Citadel sells most of AI hedge fund assets after $4 billion block-trade spree

In a client letter, Ken Griffin disclosed that Citadel has shed more than 80% of the aggregate risk tied to its emergency acquisition of assets from the AI-focused hedge fund Situational Awareness. The firm carried out over 100 block trades, moving assets valued at more than $4 billion within three weeks, effectively turning around the distressed portfolio. Situational Awareness, founded by 25-year-old Leopold Aschenbrenner, had grown to $20 billion by concentrating on AI stocks such as SanDisk and Micron, but market turmoil forced a 24-hour fire-sale to Citadel at roughly a 10% discount.

Since the purchase, shares of the key holdings have regained some losses, and Citadel’s Wellington multistrategy fund recorded a 5.94% return in July, its strongest monthly performance since 2022. The deal attracted attention from prominent investors, including Neil Mehta, Dan Sundheim, Gaurav Kapadia’s foundation, and former Tiger Global head Feroz Dewan, many of whom had previously warned Aschenbrenner about his aggressive strategy. The episode underscores Citadel’s capacity to manage large-scale market dislocations and highlights the volatility surrounding AI-centric investments.