Why Did Situational Awareness Sell to Citadel?

Situational Awareness sold basically its entire publicly traded portfolio to the hedge fund Citadel at a 10 percent discount after a July selloff in artificial-intelligence shares left the fund down 67 percent.

Gearing amplified the loss. Many investors now use geared exchange-traded funds, and in countries like South Korea and the US some use single-share geared funds. Mark LaMonica says gearing works both ways and amplifies returns on the upside and on the downside. Situational Awareness needed to unload positions fast, because selling the public shares on the open market would have caused further falls. The fund first considered selling a prize stake in Anthropic, which is supposed to go public later in the year. People think the stake will make a lot of money. The fund then went to Citadel and sold the publicly traded portfolio at a 10 percent discount to the share-market price.

Mark LaMonica says Leopold Aschenbrenner could still be right about the artificial-intelligence thesis, and the specific shares could continue to do really well. The problem was being forced to sell. Leverage is what put Leopold Aschenbrenner in that position. For an individual, an emergency fund and an asset allocation matched to the goal make it easier to choose the time of a sale. Diversification is the other lesson, so a portfolio is not overexposed to a single theme.