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This fund returned 47% in its first 6m and over 400% prior to the downturn. I don't understand how the investors didn't realize this was going to blow up. Retu

by bko 2mo ago

This fund returned 47% in its first 6m and over 400% prior to the downturn. I don't understand how the investors didn't realize this was going to blow up. Returns like that are not asymmetrical and can only be produced with leverage, at least when you're trading paper. When something is inevitable and there is a large enough position, this makes adversarial attacks likely. Every small drop causes an amplified amount of pain to the investor which causes them to liquidate positions furthering the decline. SA doesn't have the history or relationships yet to endure margin calls. I don't see the edge these companies have when they're just going long a very particular position, namely anything related to AI. Long term value in finance is made in a couple of ways. For instance, relationships & being able to source deals (lots of PE firms), short term trading infrastructure and knowledge (Renaissance), capital and clout to make favorable deals (Buffet), etc. Even then the skills are fleeting as employees leave taking knowledge and companies raise money to compete. Buying Nvidia on leverage is not a long term strategy. Especially when all your investments are common stock and obvious.

anonym29 2mo ago
>This fund returned 47% in its first 6m and over 400% prior to the downturn. >Returns like that are not asymmetrical and can only be produced with leverage This is simply untrue. Just because the path to doing so is much more clear in hindsight doesn't mean it wasn't possible. Sandisk is still up 110.82% in the last 6 months, and that's after a drawdown that's now approaching 50% from peak. Over the last year, they're up 2730%, and again, this is after the drawdown. Zero leverage.
- gizajob 2mo ago
  The skill in the stock market, and the value of any kind of investment fund, is producing good returns over an actual long-term period. YOLO-ing once before imploding in one of the biggest bull markets ever can be done by any gambling degenerate out there.
  - anonym29 2mo ago
    I don't disagree at all with what you're saying, but it has nothing to do with what I said, which is strictly a refutation of the assertion that it's only possible to achieve a 47% return in 6 months or 400%+ return in ~2 years with leverage.
  - HarHarVeryFunny 2mo ago
    True, but he is still, even after this, up 80% YTD, so not a total implosion. No doubt he has learnt a valuable lesson. Many famous investors, such as George Soros, have had huge losses at some point in their career, but have taken in in their stride and still done well. If you are taking big swings then sometimes you will have big misses.
- HeyBigE 2mo ago
  Uhhh.. you think this isn't driven by options trading? Which is, by definition, leverage.
  - anonym29 2mo ago
    That's not at all what I said. What I said had nothing to do with the mechanics driving broader market behavior. What I said was strictly a refutation of the assertion that it's only possible to achieve a 47% return in 6 months or 400%+ return in ~2 years with leverage. That's a demonstrably false assertion. If you bought Sandisk, $SNDK, not options but the actual underlying equity, with no margin, just fully purchased the position with cash, you're up 110% if you bought six months ago (down from over 200%, but 110% in 6 months is still enormous), and you're up over 2700% if you bought a year ago.
pliny 2mo ago
>Returns like that are not asymmetrical and can only be produced with leverage, at least when you're trading paper. Definitely not true, looking at their last 13f (filed in may 2026) their top3 holdings were BE, SNDK and CRWV which had 1y returns of 1,500%, 2,000% and 500% at the time of the filing. They accounted together for 15% of the fund (plus an unknown amount of exposure through options). These tickers show up in the 2 and 3 previous filings so they had exposure to some of that run up, and looking at the filings further back they had some very concentrated exposure to INTC in a half year period where the stock went up about 200%
- cj 2mo ago
  Looking at their 13f filing (filed in may 2026), they had $8 billion of leveraged put options.
  - HarHarVeryFunny 2mo ago
    Interesting - I guess at least some attempt at hedging given that they held puts in some of the same stocks they were long on. https://whalewisdom.com/filer/situational-awareness-lp https://whalewisdom.com/filer/situational-awareness-lp Or perhaps this was more of an attempt to lock in some profits while still riding it higher? It seems most of his puts were in the chip stocks while his portfolio was more focused on "next phase" datacenter/infra stocks.
    - pliny 2mo ago
      They had very large put positions on stock that they had very small long stock positions in, I think they were net short in almost everything they held puts on (except the smh etf put which I guess is an attempt to cancel out sector beta)
  - seibelj 2mo ago
    [dead]
- HarHarVeryFunny 2mo ago
  Sure, but 15% of your portfolio going up by 1000% isn't going to give you an overall 400%+ YTD return, which is where SALP was before this drop, and obviously it is no secret that they were highly leveraged. Aschenbrenner obviously understood diversification, but was overconfident and greedy and used leverage to boost returns. He was lucky that Citadel saw fit to step in and buy their portfolio rather than having to dump it into the market which would likely have been far worse.
dgellow 2mo ago
> Buying Nvidia on leverage is not a long term strategy. The whole country of South Korea is long SK Hynix and Samsung, with insane level of leverage. That won’t be a happy ending. People talk about past bubbles as if it was a good thing long term, but that will be millions of people losing their savings, homes, decades of austerity for countries to recover
PowerElectronix 2mo ago
They thought it was gonna be different this time.
didntknowyou 2mo ago
hindsight is easy. imagine apple and amazon stock holders thinking the same and selling when stock went up 100% after ipo
- HarHarVeryFunny 2mo ago
  The problem wasn't just a decline in the stocks - obviously you expect a rocky ride in stocks that are up manyfold in a short period of the time, and Aschenbrenner certainly seems to have had the conviction not to sell early. The problem was leverage - the decline in these stocks seems to have resulted in margin calls that he could not meet, resulting in forced selling. There was a very brief story that he was looking to raise additional funds, but within 24 hours he had sold much of it to Citadel instead, and for time being now holds an entirely unleveraged stock-only portfolio. https://www.businessinsider.com/leopold-aschenbrenners-letter-to-investors-after-hedge-fund-meltdown-2026-7 https://www.businessinsider.com/leopold-aschenbrenners-lette...
- JumpinJack_Cash 2mo ago
  > > imagine apple and amazon stock holders thinking the same and selling when stock went up 100% after ipo In the case of Amazon they'd have had the opportunity to buy at 97% discount compared to ATH
qurren 2mo ago
> Returns like that are not asymmetrical and can only be produced with leverage That's not generally true. There are sometimes highly asymmetrical strategies driven by market inefficiences that are not widely known. They're not easy to find though.
mgh2 2mo ago
Luck disguised by genius aura, cult on the potential "young geniuses", similar to Elizabeth Holmes: https://news.ycombinator.com/item?id=49228779 https://news.ycombinator.com/item?id=49228779 https://medium.com/@trendguardian/rigged-networks-1d5ad5c6f825 https://medium.com/@trendguardian/rigged-networks-1d5ad5c6f8...

by bko 2mo ago

anonym29 2mo ago

>This fund returned 47% in its first 6m and over 400% prior to the downturn. >Returns like that are not asymmetrical and can only be produced with leverage This is simply untrue. Just because the path to doing so is much more clear in hindsight doesn't mean it wasn't possible. Sandisk is still up 110.82% in the last 6 months, and that's after a drawdown that's now approaching 50% from peak. Over the last year, they're up 2730%, and again, this is after the drawdown. Zero leverage.

gizajob 2mo ago
The skill in the stock market, and the value of any kind of investment fund, is producing good returns over an actual long-term period. YOLO-ing once before imploding in one of the biggest bull markets ever can be done by any gambling degenerate out there.
- anonym29 2mo ago
  I don't disagree at all with what you're saying, but it has nothing to do with what I said, which is strictly a refutation of the assertion that it's only possible to achieve a 47% return in 6 months or 400%+ return in ~2 years with leverage.
- HarHarVeryFunny 2mo ago
  True, but he is still, even after this, up 80% YTD, so not a total implosion. No doubt he has learnt a valuable lesson. Many famous investors, such as George Soros, have had huge losses at some point in their career, but have taken in in their stride and still done well. If you are taking big swings then sometimes you will have big misses.
HeyBigE 2mo ago
Uhhh.. you think this isn't driven by options trading? Which is, by definition, leverage.
- anonym29 2mo ago
  That's not at all what I said. What I said had nothing to do with the mechanics driving broader market behavior. What I said was strictly a refutation of the assertion that it's only possible to achieve a 47% return in 6 months or 400%+ return in ~2 years with leverage. That's a demonstrably false assertion. If you bought Sandisk, $SNDK, not options but the actual underlying equity, with no margin, just fully purchased the position with cash, you're up 110% if you bought six months ago (down from over 200%, but 110% in 6 months is still enormous), and you're up over 2700% if you bought a year ago.

pliny 2mo ago

>Returns like that are not asymmetrical and can only be produced with leverage, at least when you're trading paper. Definitely not true, looking at their last 13f (filed in may 2026) their top3 holdings were BE, SNDK and CRWV which had 1y returns of 1,500%, 2,000% and 500% at the time of the filing. They accounted together for 15% of the fund (plus an unknown amount of exposure through options). These tickers show up in the 2 and 3 previous filings so they had exposure to some of that run up, and looking at the filings further back they had some very concentrated exposure to INTC in a half year period where the stock went up about 200%

cj 2mo ago
Looking at their 13f filing (filed in may 2026), they had $8 billion of leveraged put options.
- HarHarVeryFunny 2mo ago
  Interesting - I guess at least some attempt at hedging given that they held puts in some of the same stocks they were long on. https://whalewisdom.com/filer/situational-awareness-lp https://whalewisdom.com/filer/situational-awareness-lp Or perhaps this was more of an attempt to lock in some profits while still riding it higher? It seems most of his puts were in the chip stocks while his portfolio was more focused on "next phase" datacenter/infra stocks.
  - pliny 2mo ago
    They had very large put positions on stock that they had very small long stock positions in, I think they were net short in almost everything they held puts on (except the smh etf put which I guess is an attempt to cancel out sector beta)
- seibelj 2mo ago
  [dead]
HarHarVeryFunny 2mo ago
Sure, but 15% of your portfolio going up by 1000% isn't going to give you an overall 400%+ YTD return, which is where SALP was before this drop, and obviously it is no secret that they were highly leveraged. Aschenbrenner obviously understood diversification, but was overconfident and greedy and used leverage to boost returns. He was lucky that Citadel saw fit to step in and buy their portfolio rather than having to dump it into the market which would likely have been far worse.

dgellow 2mo ago

> Buying Nvidia on leverage is not a long term strategy. The whole country of South Korea is long SK Hynix and Samsung, with insane level of leverage. That won’t be a happy ending. People talk about past bubbles as if it was a good thing long term, but that will be millions of people losing their savings, homes, decades of austerity for countries to recover

PowerElectronix 2mo ago

They thought it was gonna be different this time.

didntknowyou 2mo ago

hindsight is easy. imagine apple and amazon stock holders thinking the same and selling when stock went up 100% after ipo

HarHarVeryFunny 2mo ago
The problem wasn't just a decline in the stocks - obviously you expect a rocky ride in stocks that are up manyfold in a short period of the time, and Aschenbrenner certainly seems to have had the conviction not to sell early. The problem was leverage - the decline in these stocks seems to have resulted in margin calls that he could not meet, resulting in forced selling. There was a very brief story that he was looking to raise additional funds, but within 24 hours he had sold much of it to Citadel instead, and for time being now holds an entirely unleveraged stock-only portfolio. https://www.businessinsider.com/leopold-aschenbrenners-letter-to-investors-after-hedge-fund-meltdown-2026-7 https://www.businessinsider.com/leopold-aschenbrenners-lette...
JumpinJack_Cash 2mo ago
> > imagine apple and amazon stock holders thinking the same and selling when stock went up 100% after ipo In the case of Amazon they'd have had the opportunity to buy at 97% discount compared to ATH

qurren 2mo ago

> Returns like that are not asymmetrical and can only be produced with leverage That's not generally true. There are sometimes highly asymmetrical strategies driven by market inefficiences that are not widely known. They're not easy to find though.

mgh2 2mo ago

Luck disguised by genius aura, cult on the potential "young geniuses", similar to Elizabeth Holmes: https://news.ycombinator.com/item?id=49228779 https://news.ycombinator.com/item?id=49228779 https://medium.com/@trendguardian/rigged-networks-1d5ad5c6f825 https://medium.com/@trendguardian/rigged-networks-1d5ad5c6f8...