Leopold Aschenbrenner has told investors that his AI-focused hedge fund, Situational Awareness, will no longer use bank borrowing to finance its investment positions following the fund’s sharp July drawdown, according to a report by the FT.
In a letter sent to investors, Aschenbrenner accepted full responsibility for the losses and said the experience would prompt significant changes to the firm’s approach to portfolio construction and risk management.
Despite the setback, he confirmed that Situational Awareness will continue investing in public equities rather than wind down the strategy.
Aschenbrenner said the fund’s structure must be able to withstand periods of severe market stress, adding that the recent losses had highlighted the importance of ensuring the business can absorb setbacks and continue operating through periods of heightened volatility.
The manager also described the market dynamics surrounding the fund during the sell-off as resembling a “bank run”, citing heavy trading in stocks widely associated with the firm’s portfolio.
