Citadel has substantially reduced the risk associated with the portfolio it acquired from Leopold Aschenbrenner's Situational Awareness hedge fund, an internal client letter from Citadel head Ken Griffin indicates. According to reporting that reviewed the letter, the firm unwound more than 80% of the risk embedded in those holdings.
Griffin said Citadel executed over 100 block trades, representing more than $4 billion in market value, as part of the effort to pare back exposure from the assets purchased from the AI-focused fund. The letter states the process required active coordination across trading desks and the prime brokerage operations at the banks that serve both parties.
Discussions to transfer some of Situational Awareness's positions to Citadel began on July 29, the letter reported. One day later, reporting indicated Situational Awareness had been compelled to liquidate all of its public stock positions after incurring steep losses, with Citadel identified as the buyer of a large portion of the assets.
Griffin emphasized that completing a transaction of this magnitude depended on cooperation from multiple bank teams and thanked those groups for their concentrated efforts to enable the rapid transfer and subsequent risk reduction.
Also noted in the communication was a performance update for Citadel's flagship multistrategy vehicle: the Wellington fund returned 5.94% in July, its strongest month since 2022, the letter said.
Situational Awareness, which was founded by former OpenAI researcher Leopold Aschenbrenner, experienced a roughly 67% drop in July after a reversal in highly concentrated and leveraged bets on AI-related stocks. The fund had posted a reported 439% gain in the first half of 2026 before holdings including SanDisk and Micron fell sharply, prompting a rapid unwind of positions.
Citadel assumed control of billions of dollars of assets as Situational Awareness sought liquidity and cut leverage. The hedge fund maintained some private investments - for example, a stake in Anthropic - rather than closing every position or winding down entirely.
Contextual notes
- More than 100 block trades were used to reduce exposure from the purchased portfolio, totaling over $4 billion in market value.
- Negotiations to acquire portions of the fund's holdings began on July 29, with the seller subsequently forced to divest public stock positions amid steep losses.
- Citadel's Wellington fund registered a 5.94% return for July, the best monthly performance for that fund since 2022.
Market implications
The events center on concentrated, leveraged positions in AI-linked semiconductor stocks that reversed and led to rapid deleveraging. The mechanics of the transfer - large block trades coordinated with bank trading and prime brokerage teams - underline operational demands when moving sizable, distressed portfolios into new ownership.