Davis Giangiulio of CNBC
reports Ken Griffin says Citadel unwound more than 80% of risk tied to Situational Awareness portfolio:
Ken Griffin of Citadel in a letter to clients on Friday addressed for
the first time the firm’s purchase of assets from Leopold
Aschenbrenner’s Situational Awareness hedge fund.
According to a
letter obtained by CNBC’s Sara Eisen, Griffin told clients that Citadel
has unwound more than 80% of the aggregate risk from the original
portfolio purchased by conducting more than 100 block trades over $4
billion in market value.
Griffin
detailed in the letter that Citadel entered discussions with
Situational Awareness to acquire some of the fund’s holdings on July 29.
One day later, CNBC’s David Faber reported that Situational Awareness
was forced to sell all of its public stock positions after facing steep losses. Citadel was later revealed as the buyer of the assets.
“A
transaction of this magnitude could not have been completed without the
extraordinary cooperation of the trading and prime brokerage teams at
the banks serving both firms,” Griffin wrote in the Friday letter to
clients. “I am grateful for the focused effort they brought to the rapid
transfer of the portfolio.”
Griffin also confirmed the firm’s flagship multistrategy Wellington fund returned 5.94% in July, which CNBC previously reported marked the fund’s best monthly performance since 2022.
Situational
Awareness as a hedge fund concentrated positions in the artificial
intelligence trade, on a belief by 25-year-old Aschenbrenner that the
technology would fundamentally reshape the world and the economy. At the
same time, the fund had short positions in some software companies, a
sector that investors have worried will be disrupted by AI.
However,
the AI trade faltered in June and July — even while broader indexes
appeared flat — with stocks that Situational Awareness had large stakes
in, like Sandisk and Bloom Energy, tumbling more than 50%. At the same time, software names like Adobe rebounded, meaning the fund was losing money on both its long and short positions.
That set off both margin calls and compulsory sales at the fund.
Since
Citadel stepped in to buy the fund’s publicly traded assets, the AI
trade has rebounded, with Situational Awareness’ sale representing a
bottom for the sell-off that started in June.
It's that time of the quarter again where we get a sneak peek into the portfolios of the world's most successful money managers, with a customary 45-day lag.
The data was out on Monday, but before I get to it, I led with this article on Citadel profiting off of Situational Awareness's woes, scooping up the portfolio on the cheap and then selling 80% as these stocks rebound.
All this happened in the last few weeks, an amazing story which I chronicled here, and it wasn't just Citadel that profited; other large hedge funds did as well in a coordinated attack where the ruling class of hedge fund kings taught young Leopold Aschenbrenner a lesson he will never forget.\
Citadel made a killing here. Its flagship multistrategy Wellington fund returned 5.94% in July, the fund’s best monthly performance since 2022. And keep in mind, they manage risk extremely tightly and handled the Situational Awareness portfolio perfectly, buying it at the right time and selling it when positions fully recovered.
How did it do this? Just look at shares of Sandisk, hit a low of $998 on July 29th and recently popped just shy of $1,827 on August 17th when Citadel probably sold a good chunk at a big profit (they bought at a discount so less than $998 a share).
And if you look at the major institutional holders of Sandisk here, you will see the regular large investors but dig a little deeper, and you'll see top hedge funds owned it as well (remember, this data is as of the end of last quarter).
Importantly, there was huge money to be made just trading this stock, and top hedge funds pounded on the opportunity (next quarterly filing will prove this).
What else happened this week? Former macro hedge fund manager turned Treasury Secretary Scott Bessent engaged in yield curve control, trying to bring down rates on the long end. So far his efforts have not worked, but he has a huge toolkit to work with.
I don't know, I agree with JPMorgan’s James Sullivan, the Treasury buybacks may offer temporary relief but risk merely shifting the debt problem down the road, and it's not bullish for the greenback.
Surging government and corporate debt supply, alongside waning foreign demand, could keep upward pressure on yields.
Of course, I have a solution for all this: slap on a 2% sales tax in the US and pay off some debt!!
Back to stocks. The Dow surges 500 points on Friday, but the index posted back-to-back weekly losses:
The S&P 500 rose on Friday as investors tried to find their footing following a steep sell-off driven by rising Treasury yields.
The broad market index climbed 0.43% to end at 7,674.37, while the Nasdaq Composite rose 0.43% to 26,180.45. The Dow Jones Industrial Average was up 517.80 points, or 0.98%, supported by gains in healthcare stocks such as Merck and Johnson & Johnson. The 30-stock index closed at 53,277.01.
The financials sector offered a boost to the broader market, with crypto-related stocks seeing sizable gains as bitcoin posted a weekly advance of 22%. Robinhood shares jumped almost 14%, while Coinbase added 8%. Materials also outperformed, up 2% on the day.
Wall
Street is coming off a losing session, as Treasury yields resumed their
march higher after the government’s efforts to stymie a sell-off in the
Treasury market. Bonds, particularly on the long end of the curve, have
been under pressure as investors fear rising inflation due to higher
oil prices.
Thursday’s pullback ultimately led the S&P 500 to
tumble 1.4% on the week, while the Nasdaq lost 2% in the period. Both
indexes snapped three-week winning streaks. The Dow slid 0.9% for
back-to-back weekly losses.
The downturn this week also affected
stocks beyond the U.S., with the MSCI All Country World Index posting a
weekly decline of almost 1%.
In the wake of the latest market
drawdown, Leo Kelly, founder and CEO of Verdence Capital Advisors,
thinks equities could see even more losses — particularly, a slide
toward correction territory in the fall — if Treasury yields continue to
rise and tensions in the Middle East persist.
On Friday, longer-dated yields continued their ascent, with the 10-year Treasury note yield gaining more than 3 basis points to 4.734%. The 30-year Treasury bond yield advanced more than 3 basis points as well to 5.273%.
“The
market has adjusted to 4% to 5%” on the 10-year yield, Kelly said. “If
we had some sort of event and the market broke out and went to the 6% to
7% range on the 10-year, that’s a problem, and the market will react
poorly to that.”
With yields higher, investors will be turning to
next week’s speech from Federal Reserve Chairman Kevin Warsh at the
Jackson Hole Economic Policy Symposium for more clarity on that front, as well as other areas such as central bank independence.
For the week, here are the top-performing US large-cap and mid-cap stocks (see full list here and here):
I circled some of the symbols I tracked closely this week. For example:
- Moderna shares (MRNA) surged 129% this week on promising results of its cancer vaccine for melanoma. Among its top holders Fidelity, BackRock, Vanguard, Baillie Gifford and Two Sigma.
- Shares of Amylyx Pharmaceuticals (AMLX) surged 79% this week after after its treatment candidate for post-bariatric hypoglycemia (PBH) reported strong results in phase 3 clinical studies. Among its top holders, you have Fidelity, BlackRock, Perceptive Advisors and Vanguard.
I'm just showing you two examples here but you really need to do a lot of work to understand who bought which stocks and who did well and why.
Importantly, things move in real time, not lagged time, but you can still learn a lot by paying attention to where top funds are focusing their attention and add that information to your toolkit.
What else? If you look at the top performing stocks year-to-date (full list here), you'll see a lot of stocks up 300% or more, which shows you trends tend to persist in this market:
I circled a few, including 10x Genomics (TXG), which Stanley Druckenmiller's Duquesne family office owns (and made a killing off of, see his positions here).
Again, I don't expect people to look at all the top funds' holdings below and if you don't understand how to technically analyze daily or weekly charts or if you don't understand biotech stocks, forget about it.
I'm providing you a toolkit, your analysts need to dig hard here to figure out opportunities and then discuss with portfolio managers who need to trade these stocks and figure out the right setup.
Is there alpha here? You bet there is but you need to know how to find it and take the appropriate risks.
Ok, let me wrap this up, time to enjoy my weekend.
The links below take you straight to the top holdings of top money managers and then click to see where they increased and decreased
their holdings.
Top multi-strategy, event-driven hedge funds and large hedge fund managers
As the name implies, these hedge funds invest across a wide variety of
hedge fund strategies like L/S Equity, L/S credit, global macro,
convertible arbitrage, risk arbitrage, volatility arbitrage, merger
arbitrage, distressed debt and statistical pair trading. Below are links
to the holdings of some top multi-strategy hedge funds I track
closely:
1) Appaloosa LP (David Tepper)
2) Citadel Advisors (Ken Griffin)
3) Balyasny Asset Management
4) Point72 Asset Management (Steve Cohen)
5) Millennium Management (Izzy Englander)
6) Farallon Capital Management
7) Shonfeld Strategic Partners
8) Walleye Capital
9) Verition Fund Management
10) Peak6 Investments
11) Kingdon Capital Management
12) HBK Investments
13) Highbridge Capital Management
14) Highland Capital Management
15) Hudson Bay Capital Management
16) Pentwater Capital Management
17) Sculptor Capital Management (formerly known as Och-Ziff Capital Management)
18) ExodusPoint Capital Management
19) Carlson Capital Management
20) Magnetar Capital
21) Whitebox Advisors
22) QVT Financial
23) Paloma Partners
24) Weiss Multi-Strategy Advisors
25) York Capital Management
Top Global Macro Hedge Funds and Family Offices
These hedge funds gained notoriety because of George Soros, arguably the
best and most famous hedge fund manager. Global macros typically
invest across fixed income, currency, commodity and equity markets.
George Soros, Carl Icahn, Stanley Druckenmiller, Julian Robertson have
converted their hedge funds into family offices to manage their own
money.
1) Soros Fund Management
2) Icahn Associates
3) Duquesne Family Office (Stanley Druckenmiller)
4) Bridgewater Associates
5) Pointstate Capital Partners
6) Caxton Associates (Bruce Kovner)
7) Tudor Investment Corporation (Paul Tudor Jones)
8) Discovery Capital Management (Rob Citrone)
9) Moore Capital Management
10) Rokos Capital Management
11) Element Capital
12) Bill and Melinda Gates Foundation Trust (Michael Larson, the man behind Gates)
Top Quant and Market Neutral Hedge Funds
These funds use sophisticated mathematical algorithms to make their
returns, typically using high-frequency models so they churn their
portfolios often. A few of them have outstanding long-term track records
and many believe quants are taking over the world.
They typically only hire PhDs in mathematics, physics and computer
science to develop their algorithms. Market neutral funds will
engage in pair trading to remove market beta. Some are large asset
managers that specialize in factor investing.
1) Alyeska Investment Group
2) Renaissance Technologies
3) DE Shaw & Co.
4) Two Sigma Investments
5) Cubist Systematic Strategies (a quant division of Point72)
6) Man Group
7) Analytic Investors
8) AQR Capital Management
9) Dimensional Fund Advisors
10) Quantitative Investment Management
11) Oxford Asset Management
12) PDT Partners
13) TPG Angelo Gordon
14) Quantitative Systematic Strategies
15) Quantitative Investment Management
16) Bayesian Capital Management
17) SABA Capital Management
18) Quadrature Capital
19) Simplex Trading
Top Deep Value, Activist, Growth at a Reasonable Price, Event Driven and Distressed Debt Funds
These are among the top long-only funds that everyone tracks. They
include funds run by legendary investors like Warren Buffet, Seth
Klarman, Ron Baron and Ken Fisher. Activist investors like to make
investments in companies where management lacks the proper incentives to
maximize shareholder value. They differ from traditional L/S hedge
funds by having a more concentrated portfolio. Distressed debt funds
typically invest in debt of a company but sometimes take equity
positions.
1) Abrams Capital Management (the one-man wealth machine)
2) Berkshire Hathaway
3) TCI Fund Management
4) Baron Partners Fund (click here to view other Baron funds)
5) BHR Capital
6) Fisher Asset Management
7) Baupost Group
8) Fairfax Financial Holdings
9) Fairholme Capital
10) Gotham Asset Management
11) Fir Tree Partners
12) Elliott Investment Management (Paul Singer)
13) Jana Partners
14) Miller Value Partners (Bill Miller)
15) Highfields Capital Management
16) Eminence Capital
17) Pershing Square Capital Management
18) New Mountain Vantage Advisers
19) Atlantic Investment Management
20) Polaris Capital Management
21) Third Point
22) Marcato Capital Management
23) Glenview Capital Management
24) Apollo Management
25) Avenue Capital
26) Armistice Capital
27) Blue Harbor Group
28) Brigade Capital Management
29) Caspian Capital
30) Kerrisdale Advisers
31) Knighthead Capital Management
32) Relational Investors
33) Roystone Capital Management
34) Scopia Capital Management
35) Schneider Capital Management
36) ValueAct Capital
37) Vulcan Value Partners
38) Okumus Fund Management
39) Eagle Capital Management
40) Sasco Capital
41) Lyrical Asset Management
42) Gabelli Funds
43) Brave Warrior Advisors
44) Matrix Asset Advisors
45) Jet Capital
46) Conatus Capital Management
47) Starboard Value
48) Pzena Investment Management
49) Trian Fund Management
50) Oaktree Capital Management
51) Fayez Sarofim & Co
52) Southeastern Asset Management
Top Long/Short Hedge Funds
These hedge funds go long shares they think will rise in value and short
those they think will fall. Along with global macro funds, they
command the bulk of hedge fund assets. There are many L/S funds but
here is a small sample of some well-known funds.
1) Adage Capital Management
2) Viking Global Investors
3) Greenlight Capital
4) Maverick Capital
5) Pointstate Capital Partners
6) Marathon Asset Management
7) Tiger Global Management (Chase Coleman)
8) Coatue Management
9) D1 Capital Partners
10) Artis Capital Management
11) Fox Point Capital Management
12) Jabre Capital Partners
13) Lone Pine Capital
14) Paulson & Co.
15) Bronson Point Management
16) Hoplite Capital Management
17) LSV Asset Management
18) Hussman Strategic Advisors
19) Cantillon Capital Management
20) Brookside Capital Management
21) Blue Ridge Capital
22) Iridian Asset Management
23) Clough Capital Partners
24) GLG Partners LP
25) Cadence Capital Management
26) Honeycomb Asset Management
27) New Mountain Vantage
28) Penserra Capital Management
29) Eminence Capital
30) Steadfast Capital Management
31) Brookside Capital Management
32) PAR Capital Capital Management
33) Gilder, Gagnon, Howe & Co
34) Brahman Capital
35) Bridger Management
36) Kensico Capital Management
37) Situational Awareness LP
38) Soroban Capital Partners
39) Passport Capital
40) Pennant Capital Management
41) Mason Capital Management
42) Tide Point Capital Management
43) Sirios Capital Management
44) Hayman Capital Management
45) Highside Capital Management
46) Tremblant Capital Group
47) Decade Capital Management
48) Suvretta Capital Management
49) Bloom Tree Partners
50) Cadian Capital Management
51) Matrix Capital Management
52) Senvest Partners
53) Falcon Edge Capital Management
54) Park West Asset Management
55) Melvin Capital Partners (Plotkin shut down Melvin after reeling rom Redditor attack)
56) Owl Creek Asset Management
57) Portolan Capital Management
58) Proxima Capital Management
59) Tourbillon Capital Partners
60) Impala Asset Management
61) Valinor Management
62) Marshall Wace
63) Light Street Capital Management
64) Rock Springs Capital Management
65) Rubric Capital Management
66) Whale Rock Capital
67) Skye Global Management
68) York Capital Management
69) Zweig-Dimenna Associates
Top Sector and Specialized Funds
I like tracking activity funds that specialize in real estate, biotech,
healthcare, retail and other sectors like mid, small and micro caps.
Here are some funds worth tracking closely.
1) Avoro Capital Advisors (formerly Venbio Select Advisors)
2) Baker Brothers Advisors
3) Perceptive Advisors
4) RTW Investments
5) Healthcor Management
6) Orbimed Advisors
7) Deerfield Management
8) BB Biotech AG
9) Birchview Capital
10) Ghost Tree Capital
11) Soleus Capital Management
12) Oracle Investment Management
13) Palo Alto Investors
14) Consonance Capital Management
15) Camber Capital Management
16) Redmile Group
17) Casdin Capital
18) Bridger Capital Management
19) Boxer Capital
20) Omega Fund Management
21) Bridgeway Capital Management
22) Cohen & Steers
23) Cardinal Capital Management
24) Munder Capital Management
25) Diamondhill Capital Management
26) Cortina Asset Management
27) Geneva Capital Management
28) Criterion Capital Management
29) Daruma Capital Management
30) 12 West Capital Management
31) RA Capital Management
32) Sarissa Capital Management
33) Rock Springs Capital Management
34) Senzar Asset Management
35) Paradigm Biocapital Advisors
36) Sphera Funds
37) Tang Capital Management
38) Thomson Horstmann & Bryant
39) Ecor1 Capital
40) Opaleye Management
41) NEA Management Company
42) Sofinnova Investments
43) Great Point Partners
44) Tekla Capital Management
45) Van Berkom and Associates
Mutual Funds and Asset Managers
Mutual funds and large asset managers are not hedge funds but their
sheer size makes them important players. Some asset managers have
excellent track records. Below, are a few funds investors track closely.
1) Fidelity
2) BlackRock Inc
3) Wellington Management
4) AQR Capital Management
5) Sands Capital Management
6) Brookfield Asset Management
7) Dodge & Cox
8) Eaton Vance Management
9) Grantham, Mayo, Van Otterloo & Co.
10) Geode Capital Management
11) Goldman Sachs Group
12) JP Morgan Chase & Co.
13) Morgan Stanley
14) Manulife Asset Management
15) UBS Asset Management
16) Barclays Global Investor
17) Epoch Investment Partners
18) Thornburg Investment Management
19) Kornitzer Capital Management
20) Batterymarch Financial Management
21) Tocqueville Asset Management
22) Neuberger Berman
23) Winslow Capital Management
24) Herndon Capital Management
25) Artisan Partners
26) Great West Life Insurance Management
27) Lazard Asset Management
28) Janus Capital Management
29) Franklin Resources
30) Capital Research Global Investors
31) T. Rowe Price
32) First Eagle Investment Management
33) Frontier Capital Management
34) Akre Capital Management
35) Brandywine Global
36) Brown Capital Management
37) Victory Capital Management
38) Orbis Allan Gray
39) Ariel Investments
40) ARK Investment Management
Canadian Asset Managers
Here are a few Canadian funds I track closely:
1) Addenda Capital
2) Letko, Brosseau and Associates
3) Fiera Capital Corporation
4) West Face Capital
5) Hexavest
6) 1832 Asset Management
7) Jarislowsky, Fraser
8) Connor, Clark & Lunn Investment Management
9) TD Asset Management
10) CIBC Asset Management
11) Beutel, Goodman & Co
12) Greystone Managed Investments
13) Mackenzie Financial Corporation
14) Great West Life Assurance Co
15) Guardian Capital
16) Scotia Capital
17) AGF Investments
18) Montrusco Bolton
19) CI Investments
20) Venator Capital Management
21) Van Berkom and Associates
22) Formula Growth
23) Hillsdale Investment Management
Pension Funds, Endowment Funds, Sovereign Wealth Funds and the Fed's Swiss Surrogate
Last but not least, I the track activity of some pension funds,
endowment, sovereign wealth funds and the Swiss National Bank (aka the Fed's Swiss surrogate). Below, a
sample of the funds I track closely:
1) Alberta Investment Management Corporation (AIMco)
2) Ontario Teachers' Pension Plan
3) Canada Pension Plan Investment Board
4) Caisse de dépôt et placement du Québec
5) OMERS Administration Corp.
6) Healthcare of Ontario Pension Plan (HOOPP)
7) British Columbia Investment Management Corporation (BCI)
8) Public Sector Pension Investment Board (PSP Investments)
9) PGGM Investments
10) APG All Pensions Group
11) California Public Employees Retirement System (CalPERS)
12) California State Teachers Retirement System (CalSTRS)
13) New York State Common Fund
14) New York State Teachers Retirement System
15) State Board of Administration of Florida Retirement System
16) State of Wisconsin Investment Board
17) State of New Jersey Common Pension Fund
18) Public Employees Retirement System of Ohio
19) STRS Ohio
20) Teacher Retirement System of Texas
21) Virginia Retirement Systems
22) TIAA CREF investment Management
23) Harvard Management Co.
24) Norges Bank
25) Nordea Investment Management
26) Korea Investment Corp.
27) Singapore Temasek Holdings
28) Yale Endowment Fund
29) Swiss National Bank (aka, the Fed's Swiss surrogate)
Below, Ken Griffin's Citadel has offloaded more than 80% of the aggregate risk associated with the Situational Awareness stock portfolio it acquired from the embattled AI hedge fund. Citadel struck a deal last month to buy stocks from the fund led by Leopold Aschenbrenner. Bloomberg's Hema Parmar reports.
Also, the CNBC Investment Committee debates whether we are in Wall Street's most exciting era as BlackRock's Rick Rieder says we are (from Thursday's HalfTime report).
Third, Tom Lee, Fundstrat managing partner and head of research, and Bryn Talkington, Requisite Capital Management managing partner, join 'Closing Bell' to recap the day's market moves.
Lastly, Bill Dudley, a Bloomberg Opinion columnist and former New York Fed President, explains why he thinks US the equity market is in bubble territory. Speaking with Romaine Bostick on "Bloomberg The Close," Dudley also comments on the economic impact of AI and the rise in bond yields.
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