Situational Awareness adds new brokers as it rebuilds tech bets

In short: Hedge fund Situational Awareness is lining up new broker support and restarting aggressive bets on tech companies after a major setback.

What's going on

Situational Awareness, the hedge fund run by Leopold Aschenbrenner, has started building relationships with new brokerages as it tries to recover from steep losses earlier this year, according to the Financial Times. A hedge fund is a type of investment firm that can make complex, higher-risk trades.

People familiar with the matter told the FT that the fund has recently begun working with Clear Street, a smaller specialist brokerage. Brokers are like the middlemen and lenders of the trading world. They help funds place trades and can provide financing.

The fund previously avoided a near collapse this summer by selling most of its public market positions to Citadel, Ken Griffin’s hedge fund. Aschenbrenner told investors the fund’s assets fell 67 percent in July, although he also said it was still up 80 percent for the year at that time.

Now, the fund is rebuilding large positions in technology names including chip makers AMD, Intel, SK Hynix, and Sandisk, plus AI-related start-ups like CoreWeave, according to the report. It has also used “fully-paid” options, meaning it pays upfront and can only lose that upfront amount (like buying a ticket that cannot cost more later).

What to watch

The FT reports the fund has been placing “flex options,” which are customized options contracts arranged through big brokers. Investors will likely watch whether Aschenbrenner keeps leverage lower than before, since borrowing to boost bets can magnify both gains and losses.

Source: Financial Times