A hedge fund collapse is offering 11% for the obvious answer

Citadel bought the bulk of Situational Awareness LP's public stock portfolio in one block before the open on Thursday. Polymarket's fund wind-down market opened the same morning and, at the time of writing this piece, prices a 2% probability of that happening by August 31 and 11% by the end of the year.

The rules exclude "the liquidation of positions, a strategy, or a portfolio without a wind-down of the fund". They also exclude redemption gates and partial redemptions, the two ways a fund slows investors down without closing. A yes needs Situational Awareness to cease operations, wind up the partnership, or hand back all outside money. Thursday's sale is the exact event the rulebook was written to leave out.

Leopold Aschenbrenner, a former OpenAI researcher in his mid-twenties, started the fund in 2024 with about $225m. By July it ran about $20bn of client money, per the Financial Times, or $24bn per Fast Company. The $45bn figure in circulation is the gross book after roughly four times leverage.

• The fund lost 67% in July and is still up about 80% for the year
• It owns an Anthropic stake worth about $5bn, plus MatX and Fluidstack
• Situational Awareness says it will keep investing and stop borrowing to amplify public bets

Public liquidations do not always end in an announcement. Amaranth Advisors told investors of a $3bn loss, sold its book to Citadel and JPMorgan, and suspended its funds 11 days later in 2006. Long-Term Capital Management accepted an orderly liquidation as a condition of its 1998 rescue. Melvin Capital was rescued in January 2021, and Gabe Plotkin only wrote to investors 16 months later. Tiger Global fell 52% in 2022 and still manages money today.

The fast cases were funds with nothing left to hold. However, Situational Awareness has $5bn of private stock that no bank can force it to sell, a year that is still positive, and, most importantly, a letter to clients saying it is going to continue its operations.

That leaves No on both legs as the most logical position. The August and December legs, at 98.2 cents and 90 cents, respectively, return about 1.8% and 11%. If the August proceeds are rolled into the December leg, the total return is then amplified to 13.2%.