Situational Awareness Portfolio Loses 67% in July, Liquidates Most Public Equity Positions
Key Facts
The portfolio of Situational Awareness, the fund run by Leopold Aschenbrenner, fell 67% in July 2026, according to an investor letter reviewed by Reuters, as its bets on artificial intelligence stocks were hit by a selloff. The fund was forced during the crisis to liquidate most of its $16 billion public equity portfolio, the agency reported. Citadel bought part of that portfolio in a rescue operation that accompanied the unwinding of positions, amid pressure from the fund's losses. Aschenbrenner acknowledged responsibility for the outcome, writing to investors, "We have let you down," according to Reuters' account of his letter. He also told them the fund had eliminated all leverage from the portfolio following the crisis, with its response to the losses encompassing both a reduction in positions and the abandonment of financing that had amplified its exposure.
July's losses followed substantial gains earlier in the year, with Investing reporting that the fund's return after fees had reached about 439% by the end of June 2026. The fund grew to about $45 billion before the AI stock selloff, according to the website. That was the size the fund had reached before the decline, while the liquidation affected most of its public equity portfolio the following month. Despite the severity of July's losses, the fund remained up 80% since the start of 2026, according to the investor letter cited by Reuters. Its cumulative performance thus remained positive after the crisis, although its remaining year-to-date return was far below the gains Investing reported for the period ending in June, when the fund was still benefiting from the rise in its bets.
Before completing the purchase of the positions, Ken Griffin and his team at Citadel spent an entire night analysing the trading portfolio and examining its positions and liquidity, according to sources who spoke to Reuters about preparations for the deal. The review covered positions the struggling fund was seeking to offload as it reduced its public equity portfolio. The agency cited investors as saying Citadel bought some of those positions at a discount exceeding 10%, in a deal completed in July and detailed in a report in August. The investors said Citadel's purchase of the positions helped stabilise the market during July's final trading sessions, as part of the fund's bets shifted to the buyer. That same month, Citadel's flagship multistrategy Wellington fund rose 5.94%, according to Reuters, while Citadel was handling the positions it had acquired.
Following the acquisition, Citadel proceeded to unwind the purchased positions, according to an investor letter cited by Reuters in its report dated 21 August 2026. By the time of that report, it had disposed of more than 80% of the bets in the original portfolio it bought. In reducing those positions, it executed about 100 block trades, spreading the exit across a series of transactions. The total market value of the block trades exceeded $4 billion, according to details of the operation reported by the agency. Those sales followed the purchase of part of Situational Awareness's portfolio during the July crisis, shifting the operation from absorbing the struggling fund's positions to reselling most of the bets Citadel had acquired.
The fallout from the crisis extended to banks that dealt with the fund, with the U.S. Securities and Exchange Commission sending them subpoenas, according to a person familiar with the matter who spoke to Reuters. Through those requests, the SEC sought information on Situational Awareness's trades, in a regulatory move following the losses and liquidation. The information request covered the fund's use of leverage, an aspect of its activity before the crisis that was followed by its elimination from the portfolio. On financing, JPMorgan told the fund it would end its lending relationship following the losses, according to a source cited by Reuters. That development was reported by the agency in September, following the purchase of positions in July and the unwinding operations disclosed in August.