00:00So what actually happened here? How does a fund, well, we know partially how a fund
00:05goes from 45 billion to 10 billion in a month, but give us the details of what happened here.
00:12Yeah, so this story is really about borrowed money and a lot of it and how it supercharged
00:20a very crowded hot trade the world has ever seen. Banks were all lending into this,
00:27some offering four to five times the fund's own capital in terms of leverage. So what was already
00:34a big bet on AI got multiplied several times because of this leverage. Then the tech trade turned
00:42and some of the banks, they were so willing to support the fund on the way up, decided that,
00:49you know, they want to protect themselves. They want more collateral. So they asked the hedge fund
00:54for more collateral. And to find it, situational awareness had to start selling into price,
01:02which were already falling. So we have seen this story repeat time and again. What stands out really
01:08here to me is how quickly it happened. We are talking about days. And even after all that,
01:15July was down 67% for the fund. But the fund is still up 80% year to date. That
01:23shows how ferocious
01:25this AI rally has been. Why did Citadel step in? What did Ken Griffin get out of it? And,
01:33you know, were there no other positions they could have sold in order to hold on to their assets?
01:39Well, everyone loves a discount, isn't it? If anything is on sale, we all rush to buy it
01:45at the right price. But it also reflects how only a handful of firms in today's world can take on
01:54like billions of dollars of stocks in one single transaction. And a few of them got calls this week.
02:01So Millennium had a look. Jane Street, which is an investor in situational awareness itself,
02:07they also had a look. Citadel got a wind of it and they negotiated a discount and ultimately bought
02:16their positions. Negotiating through the night, according to your reporting. Nishant, you have to
02:22wonder what it says about the AI trade that maybe some of these funds pass like Millennium and Jane
02:27Street. Was this a one off or is it a warning sign about AI exposure across the market?
02:34I mean, it's hard to say that, but I won't read it too much into whether it's a signal
02:43that shows how the AI story is going to unfold. The firm hasn't gone anywhere even now. It's still among
02:51the largest equity hedge funds right now. It still holds on to anthropic bet, which is north of five
02:58billion dollars. If anything, this is an old lesson resurfacing by leverage on top of a very concentrated,
03:07you know, crowded bets. And, you know, you know, this is what it leads to. The AI thesis isn't really
03:14what was tested this week. It was the leverage behind that trade. Nishant, I wonder if you'd seen
03:20the conspiracy theories that Citadel had put out a potential Fed rate hike story in order to actually
03:29cause this sell-off. That's a little bit of a conspiracy theory that's going around Twitter. Is there any
03:33truth to it? I mean, it's hard to, as you said, it's conspiracy theory. So, you know, as journalists,
03:42it's hard to, unless, you know, we write about it. It's hard to say. You know, social media is hot
03:49these
03:49days and it becomes hot, becomes hotter whenever a story like this unfolds.
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