Citadel Buys Situational Awareness's Stock Portfolio After Big Losses in AI | Hacker News Reader

Citadel Buys Situational Awareness's Stock Portfolio After Big Losses in AI

wsj.com

54 pointsmudil17 comments

The irony is that the WSJ had profiled Situational Awareness with a glowing story just 1-2 months ago. It reminds me of my old adage: "You don't want to read about your positions in a newspaper" - it paints a large target on your back.

I think this is probably true. Allowed for Citadel and others to create a ton of pressure on SA's highly leveraged positions.

Always a bigger whale out there with the ability to exert pressure...

My 401k is all money market right now. I did that immediately after reading the HF blog post specifically about how GLM 5.2 helped them out when they had refusals from closedai. The value is in all in the future utilization of inference infrastructure profitably. The margins collapse when models are commodities and they really need to be. This is going to be one hell of a ride.

Why are the only positions espoused by tech bros cash-in-mattress or QQQ levered up 400%?

I just want to ride out this correction then I’ll be back in my mom-approved mutual fund.

You can't predict when SPY is gonna correct or by how much. When capital leaves the AI trade it will just flow back into boring stocks. DJI is up MOM 4 months running.

The SA Story is essentially an AI researcher who left OpenAI's superalignment team, published a series of viral blog posts, raised capital for a hedge fund, and capitalized on the semiconductor boom over the last two years.

They used aggressive leverage and when the semiconductor sector corrected sharply, they faced catastrophic margin calls.

What's left is $10 billion in AUM primarily tied up in a $5 billion private stake in Anthropic and various other AI company holdings, the firm effectively operates as a venture capital fund rather than a traditional hedge fund now.

Yes, it's a VC fund now that it has basically no public stocks left.

Smart men go broke three ways: liquor, ladies, and leverage - Charlie Munger

Reminds me of LTCM fund story (very smart people X highly leveraged portfolio = a perfect recipe for massive losses on black swan day)

LTCM was actually a lot more sophisticated, this fund's thesis was basically "number go up."

Count the OOMs!

I didn't know buying other funds stock portfolio was even a thing. TIL

I guess it makes sense, wondering what Citadel will do with it...

If you are a supergiant like Citadel you can simply acquire positions which are so large they are the equivalent of someone's portfolio (or put another way, Citadel sees a huge block of equities packaged up, looking to move and bids on it).

It would be like if you needed to acquire 100M shares of Apple -- usually a broker will fill that large of an order from several sources OR if some fund has the full liquidity, it can be filled from that single position (and thus acquiring the fund's portfolio position). Now repeat this for their ENTIRE portfolio.

I think it's mainly because if SA sold that much on the open market it would crash the stocks even further. Citadel is large enough to buy the entire book at a nice discount while still protecting the market from additional volatility and the fund's investors from even worse losses.

More precisely, 23 new positions were reported in their latest filing just a couple months ago, most of those being semiconductors:

https://last10k.com/sec-filings/2045724

It should be clarified that a number of those were puts.

what's the story behind Sit. Awarness?

Reply on news.ycombinator.com