Citadel’s rapid divestment strategy focused on neutralizing volatility exposure, particularly regarding US options positions sensitive to market swings. By exiting the bulk of this 'vega risk,' Griffin’s team preserved capital while navigating the volatile aftermath of Aschenbrenner’s failed strategy, which cratered due to over-leveraged wagers on AI and memory chip manufacturers.
In section Finance faces
Ken Griffin scales back risk in $16 billion AI portfolio buyout
Ken Griffin has offloaded 80% of the risk from the massive $16 billion portfolio Citadel acquired from the collapsing AI hedge fund Situational Awareness. The firm executed nearly 100 block trades totaling $4 billion to stabilize its flagship Wellington fund after absorbing the fallout from Leopold Aschenbrenner’s leveraged bets.
Despite the complexity of the acquisition, the Citadel Wellington Fund reported a 5.94% gain in July, bringing its year-to-date performance to 12%. The move serves as a tactical cleanup of the market debris left by Situational Awareness, with the firm prioritizing the liquidation of high-exposure assets to insulate its flagship investors from further instability.
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