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How to Lose $35 Billion
The Free Press • • business
Key Points:
- Cliff Asness, founder of AQR Capital Management with $254 billion in assets, commented on the collapse of Leopold Aschenbrenner’s hedge fund, Situational Awareness, which lost about $35 billion in two weeks in late July.
- Aschenbrenner’s fund employed a high-risk, concentrated strategy known as "going full Kelly," heavily investing in AI-related stocks while shorting software companies, betting on a rapid AI-driven market shift.
- The fund initially saw extraordinary gains, rising 1,000% over two years and attracting high-profile tech investors, but its aggressive leverage and concentrated bets led to a swift and severe downfall.
- In mid to late July, the AI stocks plummeted by over 30%, while the shorted software stocks rose significantly, causing massive losses exacerbated by the fund’s heavy debt load.
