Some investors saw warning signs before wunderkinds Situational Awareness fund nosedived: report

Situational Awareness — the hedge fund that bet the farm on AI only to see key investments implode last month — was backed by Wall Street and Silicon Valley big-wigs who began to see the writing on the wall before it blew up.Investing gurus jumped to back Leopold Aschenbrenner, a 24-year-old with no professional investing experience who nevertheless built a $45 billion behemoth that was leveraged heavily on AI bets.Investors included Neil Mehta, co-founder of venture-capital firm Greenoaks; Dan Sundheim, founder of the hedge fund D1 Capital Partners and a major SpaceX shareholder; the foundation of Gaurav Kapadia, founder of investment firm XN; and Feroz Dewan, the former head of public equities at Tiger Global Management, the Wall Street Journal reported this week.Some of the fund’s backers grew frustrated before the crisis and even warned Aschenbrenner about the dangers of its high-risk strategy, according to the report. The fund’s backers were also irked by what they considered to be poor communications and disclosures from the Germany-born Aschenbrenner.Most hedge funds update their investors with performance metrics monthly — but Situational only disclosed its returns quarterly, the report said.The fund borrowed big to finance its AI bets — which got it into hot water after several of its holdings plummeted last month, prompting investors to ask for their money back. To keep the fund alive, Situational sold the majority of its public stock portfolio to Ken Griffin’s Citadel.A hedge fund as big as Situational typically draws on institutional investors like pension plans, university endowments, sovereign-wealth funds and private banks. Situational, by contrast, drew many wealthy individuals in part because institutional investors were apprehensive about dolling out capital to a fund manager with such a scant record, the Journal reported.Other Situational investors included Stripe co-founders Patrick Collison and John Collison, along with Daniel ...