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Jane Street takes about $15bn July hit on AI and Situational Awareness
After a drawdown at Situational Awareness, the firm said its July trading revenue fell roughly 25% from its late-June peak, its first negative month since 2016.
Jane Street suffered an approximately $15 billion setback in July, after a sharp reversal in AI-related stocks hurt its exposure to the hedge fund Situational Awareness and other technology positions, according to a Reuters report cited by Hedgeweek. The report describes the loss as a dramatic reversal for the trading firm and says an internal note to employees pointed to the Situational Awareness drawdown as a key driver. Situational Awareness, founded by former OpenAI researcher Leopold Aschenbrenner, had been a strong performer earlier in the year, and Jane Street held an investment in the fund. Hedgeweek, citing Reuters, reports that margin pressure at Situational Awareness following declines in AI-linked equities forced it to sell most of its public-equity portfolio in a distressed transaction with Citadel, founded by Ken Griffin. Jane Street said its investment in Situational Awareness had grown significantly after the fund performed well in the first half of the year, and that its stake was roughly flat for the year despite the July losses. Jane Street said it generally uses put options to hedge against sharp market declines, but the protection was less effective because AI-stock losses unfolded gradually during July rather than as a single abrupt shock. Hedgeweek also notes Jane Street reported losses on long positions in Asian equities outside the AI sector, and it said the month marked its first negative trading revenue month since 2016, with revenue about 25% below its late-June peak.