However, it is objectively nuts to put a 24-year-old with no experience in charge of a $50B hedge fund.
? It is his fund. He started it.
I feel with the FTX and rat culture reflection, you are reading into the situation too much.
The losses, as you pointed out, happened due to highly leveraged bets. He didn’t expect memory stocks to bleed as much as they did. Besides, it is possible that the fund will survive because his core thesis has paid off exceptionally well so far. He also has a rumored $5B equity stake in a certain large AI company.
Tough time for Situational Awareness LP, but I hope they make it!
His creditors supplied the money—it is their judgement I’m questioning.
The losses, as you pointed out, happened due to highly leveraged bets. He didn’t expect memory stocks to bleed as much as they did.
This is disqualifying if you are running a hedge fund. It’s literally in the name—you are supposed to hedge your positions in order to prevent an unexpected situation from tanking the whole fund.
Besides, it is possible that the fund will survive because his core thesis has paid off exceptionally well so far
We don’t judge funds by whether they don’t go bankrupt, we judge them by their performance against a market index over a long period of time. Even if the positions are net up by 2× or so, this is not particularly impressive in and of itself over a short period, because of survivorship bias. If you make a bunch of stupidly leveraged bets on different sectors, one of them is likely to pay off very well, but not for long, and not through downturns.
The AI sector has monotonically gone up since the release of ChatGPT—any overleveraged investor in this space would be likely to produce incredible gains. If one’s fund gets obliterated at the first market downturn because one was overleveraged, all this proves is that you managed your fund badly, not that you’re some kind of savant genius market whisperer.
(c.f. anything written about Cathie Wood in 2022—a lot of it has aged very poorly)
you are supposed to hedge your positions in order to prevent an unexpected situation from tanking the whole fund
It’s my understanding that this hasn’t been the definition of a hedge fund for some time (ChatGPT agrees). I’m assume that the investors knew that Situational Awareness was not a hedge fund in the sense you’re describing one.
Of course, it might still be possible that investors weren’t aware of the amount of risks the fund was taking on.
Apparently, even $1 invested into Situational Awareness LP 6 months ago is worth $1.78 now. Totally possible he is not a savant whisperer and had enough knowledge and connections to make great bets, but the bets are still paying off. Time will tell if their hedging strategy is actually sound or just lucky.
But I don’t think this is comparable to FTX or contains any lessons for the EA community. Is Situational Awareness LP an EA venture? I could be wrong but I don’t think so. I have always thought of it as “oh I guess Aschenbrenner is doing his own thing, cool.”
It seems prudent that banks were quick to margin call him, they probably tightened this kind of stuff after archegos. They still had net assets, so this was early enough.
? It is his fund. He started it.
I feel with the FTX and rat culture reflection, you are reading into the situation too much.
The losses, as you pointed out, happened due to highly leveraged bets. He didn’t expect memory stocks to bleed as much as they did. Besides, it is possible that the fund will survive because his core thesis has paid off exceptionally well so far. He also has a rumored $5B equity stake in a certain large AI company.
Tough time for Situational Awareness LP, but I hope they make it!
His creditors supplied the money—it is their judgement I’m questioning.
This is disqualifying if you are running a hedge fund. It’s literally in the name—you are supposed to hedge your positions in order to prevent an unexpected situation from tanking the whole fund.
We don’t judge funds by whether they don’t go bankrupt, we judge them by their performance against a market index over a long period of time. Even if the positions are net up by 2× or so, this is not particularly impressive in and of itself over a short period, because of survivorship bias. If you make a bunch of stupidly leveraged bets on different sectors, one of them is likely to pay off very well, but not for long, and not through downturns.
The AI sector has monotonically gone up since the release of ChatGPT—any overleveraged investor in this space would be likely to produce incredible gains. If one’s fund gets obliterated at the first market downturn because one was overleveraged, all this proves is that you managed your fund badly, not that you’re some kind of savant genius market whisperer.
(c.f. anything written about Cathie Wood in 2022—a lot of it has aged very poorly)
It’s my understanding that this hasn’t been the definition of a hedge fund for some time (ChatGPT agrees). I’m assume that the investors knew that Situational Awareness was not a hedge fund in the sense you’re describing one.
Of course, it might still be possible that investors weren’t aware of the amount of risks the fund was taking on.
Yeah this has indeed never really been the definition of a hedge fund. Only a subset of hedge funds are approximately point-in-time market neutral.
I made claude do some quick maths:
Apparently, even $1 invested into Situational Awareness LP 6 months ago is worth $1.78 now. Totally possible he is not a savant whisperer and had enough knowledge and connections to make great bets, but the bets are still paying off. Time will tell if their hedging strategy is actually sound or just lucky.
But I don’t think this is comparable to FTX or contains any lessons for the EA community. Is Situational Awareness LP an EA venture? I could be wrong but I don’t think so. I have always thought of it as “oh I guess Aschenbrenner is doing his own thing, cool.”
It seems prudent that banks were quick to margin call him, they probably tightened this kind of stuff after archegos. They still had net assets, so this was early enough.