Ken Griffin's Citadel has disposed of more than 80% of the positions in the original portfolio it recently acquired from Situational Awareness, marking Griffin's first public comments on the transaction. The hedge fund executed nearly 100 block trades worth over $4 billion as it reduced the acquired positions. As reported by Bloomberg, Griffin stated in his investor note that "To date, working closely with our trading partners, we have successfully shed more than 80% of the aggregate risk from the original portfolio." Citadel entered discussions with Situational Awareness on July 29 about acquiring some of the fund's holdings, with the firm declining to comment on the transactions. According to Reuters, Griffin noted in his investor letter that "Only Citadel could have delivered a solution of this scale on this timeline."
Situational Awareness, an AI-focused hedge fund led by former OpenAI researcher Leopold Aschenbrenner, transferred most of its stock positions to Citadel after steep losses in technology holdings forced the fund to dismantle much of its public equities portfolio. According to Bloomberg, Griffin explained in his letter that "On July 29, we entered discussions with Situational Awareness to acquire a material portion of their holdings, a transaction that would strengthen their balance sheet and mitigate the risk of a tail event." The fund had concentrated its portfolio around the artificial intelligence trade, reflecting Aschenbrenner's view that AI would fundamentally reshape the economy. The fund also held short positions in software companies expected to face disruption from AI, with stocks including Sandisk and Bloom Energy falling more than 50% during June and July. Situational Awareness's June filing showed $5.7 billion in Sandisk Corp. and $5.6 billion in Micron Technology Inc., roughly 56% of the disclosed portfolio, along with other large holdings including Bloom Energy Corp., Taiwan Semiconductor Manufacturing Co., and Nebius Group N.V.
Griffin said the transactions included the year's largest intraday block trades in 10 different stocks, as reported by Bloomberg. "In a matter of hours, our team analyzed and priced their global portfolio," Griffin stated in the letter. "Our ability to distribute this risk was central to our investment thesis. These moments highlight our ability to quickly evaluate complex risks, deploy capital with speed and conviction, and execute with precision." Citadel purchased some of the fund's positions at a discount of more than 10%, helping to stabilise the market during the last two trading days of July. The losses hit both sides of the portfolio and triggered margin calls and compulsory sales, but the AI trade has since rebounded after Citadel acquired the publicly traded assets. Sandisk closed at $1,015.89 on July 29, surged 26% the next day after Citadel's purchase eased fears of further forced selling, and reached $1,786.85 by August 17, before falling 9% and closing Thursday at $1,600.62.
"A transaction of this magnitude could not have been completed without the extraordinary cooperation of the trading and prime brokerage teams at the banks serving both firms," Griffin noted. According to Bloomberg, Citadel Wellington, the firm's flagship multi-strategy fund, returned 5.94% in July, its strongest monthly performance since 2022, bringing its year-to-date gains to 12.02%. The firm ranks among the world's largest and most profitable hedge funds and has developed a reputation for capitalising on opportunities created by market turmoil. The Situational Awareness liquidation coincided with the bottom of the selloff that began in June, demonstrating the strategic value of Citadel's rapid intervention. Micron lost 28.7% in July but recovered above $1,000 on Monday and finished Thursday at $974.33. Griffin's rescue was also a self-fulfilling prophecy, as his agreement to buy Aschenbrenner's stock book stymied fears of more forced selling on Wall Street, which helped boost share prices across the tech industry.
