00:00Situational awareness is back in business. Sources telling Bloomberg that the hedge fund has completed a $400 million investment to
00:07back a privately held company.
00:09It's the first sign of how Leopold Ashenbrenner intends to pick up the pieces of his fund after it nearly
00:15collapsed under a wave of margin calls from lenders last week.
00:19Joining us now is Bloomberg chief hedge fund correspondent Nishant Kumar.
00:22Nishant, excellent reporting from the team. It feels notable not only that he's dipping back in, but he's not necessarily
00:28doing it in public markets.
00:32Yes. I mean, he sold all the public market investments and kept the private market investments.
00:40And this latest deal, it seems primarily as a statement of confidence.
00:46Situational awareness is showing investors that it still has capital to deploy and remains committed to its private holdings.
00:55Together with about $100 million invested in the same company last month, this appears to be a sizable commitment in
01:06a very short period of time.
01:07It is the first sign that how he intends to come back to the market, really.
01:13Is this any kind of sign that investors have lost some confidence in his management, not just on how much
01:22money they have to invest, but the strategies and given his age, his experience at dealing with these kinds of
01:29things?
01:30I mean, there is, you know, we have to wait for that verdict.
01:35He was trying to raise external capital. We don't know whether he was successful or not.
01:41But this deal, it's quite remarkable that just within days of seeing this biggest stress test of his very short
01:51investing career, he's out there doing deals of this size immediately.
01:57So he feels confident, it seems. What investors feel like we'll have to wait and watch.
02:04What about the overall hedge fund landscape right now, Nishant?
02:07Because there was a concern that hedge funds beyond situational awareness did have large, risky leverage concentrated bets in AI
02:13heading into the sell-off.
02:16Definitely. So July exposed how many managers were leaning into some momentum technology and AI trades.
02:24And when those positions reversed, the funds with the greatest concentration suffered, although several remains fine, if you look at
02:35the very sector-focused, tech-focused hedge funds,
02:40their returns have been down in double digits. They have lost in double digits.
02:45But if you look at the mainstream hedge funds, so the multi-strats of the world, who manage like tens
02:52of billions of dollars between them, I mean, they seem to be, you know, fine.
02:58I mean, they have lost some money, but they are okay.
03:01I mean, some are even positive, like Citadel picked up situational awareness bets, and they have ended the month in
03:09positive territory.
03:10But some have lost up to 3%, 4% of their assets.
03:15Any indication that anybody else is in trouble the way situational awareness was or that might need help?
03:22We obviously saw some sales in June and July of some of these portfolios.
03:27But anyone else out there that you're watching?
03:30I mean, we are definitely watching a lot of managers, a lot of managers with very concentrated bets on this
03:38highly leveraged, crowded AI trades.
03:40But so far, the losses doesn't seem to be existential, at least what we know.
03:47But you never know.
03:49Like, this is probably the most crowded trade right now in the market.
03:53It was suffering for a large part of July, but then it bounced back so significantly in the final two
04:02days of the month of July.
04:04So that helped a lot of hedge funds recover some of those losses.
04:07And that's why even the losses seem to be like 10, 15, 20 percent and not like 40, 50, 60
04:14percent, except for situational awareness.
04:17Nishant, thank you so much.
04:19Again, you and the team have just been doing such excellent reporting over the past month on all these developments.
04:24That's Bloomberg's Nishant Kumar.
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