Goldman Sachs earned over $200m in fees from hedge fund Situational Awareness

In short: Goldman Sachs made more than $200 million in fees this year by lending to the AI-focused hedge fund Situational Awareness, according to the Financial Times.

What happened

Situational Awareness, an investment firm founded in 2024, became the biggest client in Goldman Sachs’ prime brokerage business this year, according to people familiar with the matter.

Prime brokerage is a bundle of services big banks sell to hedge funds, including lending money to help them trade (like giving a shopper a large credit line so they can buy more than they could with cash).

The Financial Times reports Goldman earned more than $200 million in fees from this lending. The fees were unusually large partly because the fund grew fast and used borrowed money to increase the size of its bets.

The fund was started by Leopold Aschenbrenner, a 24-year-old former OpenAI researcher. The FT says the firm grew from a few hundred million dollars to more than $20 billion after returns of more than 400%.

Later, the fund suffered very large losses when AI-related stocks fell quickly. Borrowed money made those losses worse. The FT reports Aschenbrenner then sold most of the fund’s public stock positions to Citadel.

Aschenbrenner told investors in July that the fund would stop borrowing money to amplify trades, which could mean smaller fees for banks going forward. Goldman and Situational Awareness declined to comment, the FT said.

Why it matters

This story shows how quickly a new, high-risk fund can become a major customer for big banks when it relies on borrowing. When trades go wrong, the losses can grow faster, and banks may pull back lending, as JPMorgan reportedly did after the losses.

Source: Financial Times