Leopold Aschenbrenner’s $45B AI Fund Collapses 67% in July After 400% Leveraged Unwind

TL;DR

• Leopold Aschenbrenner’s Situational Awareness LP suffered a historic momentum crash, dropping ~67% in July as high leverage (~400%) triggered prime broker margin calls.
• Assets plummeted from $45B to $10B within days; Citadel stepped in before Thursday's open to buy out the public equity book at a discount.
• The fund is not liquidating: Aschenbrenner confirmed they will continue running the hybrid fund with an unlevered, "fully-paid-for" public book while holding private assets like their Anthropic stake. Year-to-date performance remains +80%.

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Hey everyone,

I was following the recent unwinds in the market and came across the investor letter from Leopold Aschenbrenner detailing the near-total liquidation of Situational Awareness LP's public book. Given how widely discussed his macro AI thesis was on Wall Street, the mechanics behind this forced unwind are worth looking at closely.

The fund ran a heavily levered long/short strategy, holding long positions in AI infrastructure names like CoreWeave and SK Hynix while shorting software names like Adobe. When software rallied while infrastructure stocks plummeted between 50% and 78% from recent peaks, both sides of the portfolio lost money simultaneously.

With leverage reported at up to 400%, prime brokers issued margin calls, forcing the fund to sell falling stocks into a declining market and driving the largest, fastest momentum crash in modern history, dropping Morgan Stanley’s Momentum Index 17.4% over four days.

Citadel ultimately bought the fund's public book at a discount before Thursday's opening bell. However, Aschenbrenner pushed back on liquidation rumors in his investor letter, writing: > "The fund was not shut down, liquidated, or transformed into a private-only fund. We are continuing to operate as a hybrid public-private fund as before. However, we will manage our public book on a fully-paid-for basis..."

Unlevered equity and private holdings, including a multibillion-dollar stake in Anthropic, remain intact, leaving the fund up +80% YTD despite July's -67% crash. Meanwhile, investors like Michael Burry are already adding puts to semiconductor ETFs, betting the post-unwind bounce lacks legs.

Link: https://hedgefundalpha.com/news/aschenbrenner-fund-unwind-letter/