Peter Rubinstein of Northeastern Global News reports this student wowed one of Canada’s largest pension funds with custom automation:

When Darhlilove Botchway arrived in wintery Toronto in 2025 from his home in Ghana, he felt like a fish out of water. The subfreezing temperatures shocked his system, which was accustomed to West Africa’s consistent heat. Canadian cuisine was also unfamiliar to him, he said.

“My taste buds did not really want to cope from the beginning,” he said, chuckling as he recalled his move to pursue an information systems master’s degree at Northeastern University in Toronto.

But just as he did after moving to North America, Botchway was quick to adapt and excel as a co-op at OPTrust, a prominent pension fund just a short walk from Northeastern Toronto’s downtown campus. 

OPTrust, where Botchway is an IT auditor, is responsible for ensuring that about 118,000 workers employed by the Ontario government and other agencies receive retirement benefits. 

Just as those public service employees rely on OPTrust to manage their earnings, the company leans on auditors like Botchway to ensure its operational security is airtight, he said. Botchway is tasked with identifying and mitigating security risks, creating processes and controls to shore up potential weak points in the company’s software infrastructure.

“Anything that goes wrong, especially with our critical business applications, could have a very devastating impact on our financial reporting at the end of the year, and that could really affect the organization,” Botchway said. “It really puts you in a position where, even as a developer, right from the onset, you begin to think about what could possibly go wrong: how could someone break into the system?”

Botchway said his role is important because of the high-stakes financial landscape OPTrust occupies. By the end of 2025, the company held more than $27 billion in net assets, earning it a coveted spot among the 10 largest pension funds in Canada, which are nicknamed the “Maple Revolutionaries.”

As he grew familiar with the role and its responsibilities, Botchway said he also took the initiative to think up other ways to optimize the company’s workflow. He drew from his previous automation experience at KPMG Ghana, a network of audit, tax and advisory firms, to streamline two particularly time-consuming processes at OPTrust.

For instance, Botchway constructed an automation tool that pings the person scheduled to host a daily meeting, shares details about the meeting’s contents and provides helpful links to resources they can use to plan their presentation. He also made a previously manual task obsolete by building an automated delivery service that sends a monthly report with status updates on ongoing tickets to OPTrust’s management team.

Botchway’s supervisor at OPTrust said that he consistently distinguished himself through “exceptional initiative, a proactive work ethic, and a strong problem-solving mindset,” according to Himadri Dave, a co-op adviser at Northeastern’s Toronto campus. “Rather than simply completing assigned tasks, Darhlilove regularly seeks out additional responsibilities, volunteers for new challenges, and looks for ways to improve processes for the benefit of the team,” the supervisor told Dave in a report during his co-op.

Because of his exemplary work in risk mitigation and his forward-thinking implementation of automation to streamline various internal processes, OPTrust offered Botchway a rare eight-month extension of his co-op placement, which would have otherwise only been four months.

“I think the best feedback we have received from any employer has been for Darhlilove,” said Dave, who worked closely with Botchway on his professional development. “They were even asking us if there’s a way they could keep him forever and not let him go back to the university.”

As for Botchway, he found a way around the cold. He found an underground tunnel system that kept him warm on his route to campus and swiftly came to appreciate the city’s cultural diversity, he said.

Botchway also said his introduction to Toronto company culture and the ways in which teams with different responsibilities work together have been his greatest takeaways from Northeastern.

The auditing and risk mitigation skills gained through his co-op will carry him forward as he pursues a Certified Information Systems Auditor certification before his graduation in May 2027, he said.

“That’s something I’m really proud of because I know how difficult it is, especially in my position, to extend a contract,” Botchway said of his time with OPTrust. “For someone to have that level of confidence in you, I don’t take that lightly.” 

I love this story and want to share it with my readers.

Why? Because Darhlilove Botchway represents the very best possible co-op student a large pension fund can ask for, and OPTrust rightly rewarded him by extending his contract by eight months, which is very rare.

A native from Ghana, he moved to Toronto in 2025 to pursue an information systems master’s degree at Northeastern University in Toronto.

What I love the most about him is his entrepreneurial attitude and willingness to challenge the status quo to improve the way things work at OPTrust:

For instance, Botchway constructed an automation tool that pings the person scheduled to host a daily meeting, shares details about the meeting’s contents and provides helpful links to resources they can use to plan their presentation. He also made a previously manual task obsolete by building an automated delivery service that sends a monthly report with status updates on ongoing tickets to OPTrust’s management team.

Botchway’s supervisor at OPTrust said that he consistently distinguished himself through “exceptional initiative, a proactive work ethic, and a strong problem-solving mindset,” according to Himadri Dave, a co-op adviser at Northeastern’s Toronto campus. “Rather than simply completing assigned tasks, Darhlilove regularly seeks out additional responsibilities, volunteers for new challenges, and looks for ways to improve processes for the benefit of the team,” the supervisor told Dave in a report during his co-op.

When co-op students ask me how they can get a co-op job at one of Canada's largest pension funds, I tell them straight out: "You need to network and differentiate yourself."

I also add: "You have to be lucky, landing these jobs isn't easy, so don't take it personally if you can't land one right away." 

But getting a co-op job is one thing; impressing your boss and others at the organization you work at is far more important. 

You need to take initiative, figure out how to make things run better and it's fine if your boss takes all the glory, even though I'm a big believer in giving credit to the people who deserve it (I loathe bosses who do not give credit to their employees when they deserve it).

To all co-op students, please stop asking me if you should work at BCI, La Caisse, PSP, CPP Investments, or at any other large Canadian pension fund.

First, get a job, and then if you land a job, keep your head down, work hard, and seek to add value to the team where you're working in a proactive, collaborative, and constructive way.

Also, listen and learn from people around you, soak up as much as possible, especially if you're lucky enough to have great mentors. 

In short, learn from Darhlilove Botchway, his attitude and gratitude are spot on.

OPTrust is lucky to have such a co-op student working in IT audit.  

Below, Richard Knight, Principal, and US IT Internal Audit Solutions Leader at KPMG, emphasizes how the internal auditor of tomorrow will need to possess a blend of business and IT skills, with a strong foundation in emerging technologies such as AI and data analysis, requiring a more rounded and integrated approach to auditing.

Freschia Gonzales of Benefits and Pensions Monitor reports Canada's private sector shed 25,800 pension members in 2024:

Canada's private sector lost 25,800 registered pension plan members in 2024 even as national membership climbed to nearly 7.4m, exposing a widening split between public and private workplace retirement coverage. 

The overall gain of 132,000 members, or 1.8 percent, from 2023 came almost entirely from public plans.  

According to Statistics Canada, public sector plans added nearly 157,900 participants, a 4 percent increase, taking the public total to just over 4m. 

Private sector membership, by contrast, fell 0.8 percent, dipping below 3.3m. 

Coverage is thinning even as the raw numbers grow.  

The pension coverage rate, or the share of paid workers who belong to a plan, slipped to 37.6 percent in 2024 from 37.7 percent a year earlier, extending a decline that the agency traces back to 1977. 

Defined benefit membership drove the private sector drop.  

DB membership fell by 21,300, or 1.6 percent, over the year, a decline concentrated among private employers.  

Even so, DB plans remained the dominant structure, holding 68.1 percent of all RPP membership and more than 5m active members, as reported by Statistics Canada.  

Steve Hatzipantelis, vice-president of wealth at Ontario-based credit union YNCU, blamed cost for the shift.  

He said private employers have cut DB plans by about 1.6 percent, moving away from "costly defined benefit structures" toward defined contribution and other models. 

Daniel LeBlanc, portfolio manager at wealth management firm Verecan, tied the divergence to how each sector treats retirement.  

Public sector pensions "remain a key part of employee compensation and retirement security," he said.  

Private employers, by contrast, face plans that "are expensive to administer" and have moved toward alternatives such as Group RRSPs. 

Total contributions to registered plans still rose.  

Employers and employees together put in $83.6bn in 2024, up $4.2bn or 5.4 percent from 2023, the data show.  

Women continue to anchor the DB base, holding 56.1 percent of DB membership, a share weighted toward the public sector plans in health care, education, and public administration.  

The erosion of private DB coverage lands as Canadians report rising unease about retirement.  

In its 2026 Canadian Retirement Survey, the Healthcare of Ontario Pension Plan found that only 58 percent of unretired Canadians have saved for retirement at any point, fewer than half saved in the past year, and 38 percent say they are falling behind on their current standard of living, up eight points from 2025.  

Workplace pensions are viewed as a hedge: 68 percent said such plans are more valuable in uncertain times, and 85 percent said all workers should have access to an affordable retirement savings arrangement, HOOPP reported.  

Canada's DB base still dwarfs that of its largest trading partner.  

South of the border, the US Bureau of Labor Statistics reported that, as of March 2025, 72 percent of private industry workers had access to retirement benefits, but only 14 percent had access to a defined benefit plan against 70 percent with access to a defined contribution plan.  

The contrast underlines how far the US private sector has already moved toward DC, and the direction Canadian critics say private employers are travelling.  

LeBlanc said workers without a pension can copy its mechanics. 

Those in a plan have contributions "automatically deducted from their pay," he said, and others can do the same with recurring contributions to an RRSP or TFSA.  

Hatzipantelis added that "the earlier (you start) the better," since it builds the discipline a sound retirement requires. 

I already covered the HOOPP and Abacus Data 2026 Canadian retirement survey here.

Recall the key points:

63% of people between the ages of 55-64 say they don’t feel prepared for retirement.

57% of respondents said one of the reasons they have not been able to save for retirement is that they live paycheque to paycheque.

43% felt they may never be able to retire because of their financial situation, while 50% said they would need to continue working in their retirement years to support themselves financially.

41% of respondents who are homeowners plan to rely on the sale of their home as part of their retirement planning, but 60% are worried about their ability to pay off their mortgages in time so they can retire when they want to.

71% of respondents aged 18-34 who don’t own a home felt higher interest rates will impact their ability to buy a home in the future; 84% of that group also said they were concerned about the increasing cost of rent. 

Clearly, there is a widening retirement gap in Canada between private and public sector employees. 

The latter have access to gold-plated DB plans backed by the municipal, provincial, or federal government, whereas the former are increasingly being asked to switch to a group RRSP, if they're lucky.

These figures are important to track.

From a public policy perspective, the more Canadians who retire with a DB plan, the better it is for our economy over the long run. 

Why? Certainty of income in their golden years allows them to spend more, governments reap more taxes, and it's just generally better for the economy. 

Conversely, increasing retirement angst has the opposite effect on our economy as people spend less.

"Leo, it doesn't matter. Haven't you ever heard of the trickle-down theory?"

Yes, I have and it doesn't work to bolster retirement systems or economic prosperity in general.

Canada has some of the best DB pension plans in the world but overall coverage remains abysmal, especially for private sector workers.

CAAT Pension Plan, OPTrust, HOOPP and others are doing their part to improve coverage but the trend is clearly showing loss of DB pensions in the private side.

Keep that in mind, it's an important trend.

Below, everything you need to know about Canada's government pensions: CPP, OAS & GIS.

Josh Welsh of Benefits and Pensions Monitor reports IMCO adds $300 million in pension assets with Hamilton mandate:

The Investment Management Corporation of Ontario (IMCO) has been selected to manage approximately $300 million in pension assets for the City of Hamilton, consolidating three legacy defined benefit (DB) plans that cover more than 1,000 retirees, deferred members and beneficiaries, according to its press release Thursday.

According to the organization, the mandate will require an onboarding process during which IMCO will work with the city on investment decision-making and transition planning for the legacy portfolios

The mandate marks the first time one of Ontario's largest municipalities has outsourced legacy pension fund management to IMCO. The arrangement covers only the city's closed legacy plans, which are distinct from its “open” pension fund managed separately by another manager, according to IMCO. Hamilton's active pension fund will continue to be managed separately by another provider, the firm added. 

"The City of Hamilton's decision reflects the strength of our investment platform," said Bert Clark, president and CEO of IMCO. "We provide our clients with an end-to-end, cost-effective investment solution. Expert governance, strong liquidity and risk management, and high-quality reporting and disclosure are essential to managing public funds effectively.”

Growing municipal interest in pooled investment platforms

Hamilton's move follows a pattern of Ontario broader public sector organizations shifting pension investment management to IMCO rather than running it in-house. The City of Ottawa's OC Transpo Employees' Pension Plan is already an IMCO client, as are the Ontario Pension Board (OPB), the Workplace Safety and Insurance Board (WSIB), the WISE Trust Pension Plan, the Provincial Judges' Pension Board, Ontario's Pension Benefits Guarantee Fund, Tarion Warranty Corporation and the Ontario Clean Water Agency.

Complexity driving outsourcing decisions

Clark pointed to rising investment complexity as a factor pushing more public sector organizations toward external management.

"Many Ontario public sector organizations whose core mandate is not investing continue to manage public funds directly," he said. "But, in an increasingly complex investment environment, more are recognizing the value of joining IMCO."

IMCO, which manages $90.7 billion in total assets, operates on a not-for-profit, cost-recovery basis. It offers clients asset mix advisory services, access to a diversified range of asset classes including private markets and alternatives, and portfolio-level risk management and reporting. 

Last week, IMCO issued a press release stating it has added the City of Hamilton as a new client, expanding its public sector investment partnerships across Ontario:

TORONTO (July 30, 2026) – The Investment Management Corporation of Ontario (“IMCO”) today announced that it has been selected to provide investment management services to the City of Hamilton, supporting the long-term sustainability of the City's pension obligations.

“The City of Hamilton's decision reflects the strength of our investment platform. We provide our clients with an end-to-end, cost-effective investment solution,” said Bert Clark, President and CEO, IMCO.

Following an evaluation process, IMCO was selected to manage approximately $300 million in assets for the City of Hamilton. The mandate consolidates three legacy plans supporting more than 1,000 retirees, deferred members and beneficiaries. The mandate is focused specifically on legacy pension funds, which are distinct from its “open” pension fund managed separately by another manager. IMCO will work with the City on onboarding and investment decision-making.

With the addition of the City of Hamilton, IMCO continues to expand its role as a trusted partner to public sector institutions across Ontario. IMCO provides its clients with access to asset mix advisory services, a full range of asset classes and comprehensive risk, portfolio management and reporting services, all on a cost-recovery basis.

IMCO's growing roster of clients includes:

• Ontario Pension Board (“OPB”), administrator of the Public Service Pension Plan
• Workplace Safety and Insurance Board (WSIB), Insurance and Loss of Retirement Income funds
• WISE Trust Pension Plan, administrator of the WSIB Employees’ Pension Plan
• Provincial Judges’ Pension Board, administrator of the Provincial Judges’ Pension Plan
• Ontario's Pension Benefits Guarantee Fund (PBGF)
• City of Ottawa, administrator of the OC Transpo Employees’ Pension Plan
• Tarion Warranty Corporation’s Guarantee Fund (Tarion)
• Ontario Clean Water Agency’s (OCWA) reserve fund

“Many Ontario public sector organizations whose core mandate is not investing continue to manage public funds directly. But, in an increasingly complex investment environment, more are recognizing the value of joining IMCO,” continued Clark.

“Expert governance, strong liquidity and risk management, and high-quality reporting and disclosure are essential to managing public funds effectively.”

About IMCO

The Investment Management Corporation of Ontario (“IMCO”) manages $90.7 billion of assets on behalf of its clients. Designed exclusively to drive better investment outcomes for Ontario's broader public sector, IMCO operates under an independent, not-for-profit, cost recovery structure. We provide leading investment management services, including portfolio construction advice, better access to a diverse range of asset classes and sophisticated risk management capabilities. As one of Canada's largest institutional investors, we invest around the world and execute large transactions efficiently. Our scale gives clients access to a well-diversified global portfolio, including sought-after private and alternative asset classes. Follow us on LinkedIn and X @imcoinvest. 

I'm going to briefly go over my thoughts here.

First, and most importantly, I agree with IMCO's CEO Bert Clark:

“Many Ontario public sector organizations whose core mandate is not investing continue to manage public funds directly. But, in an increasingly complex investment environment, more are recognizing the value of joining IMCO. Expert governance, strong liquidity and risk management, and high-quality reporting and disclosure are essential to managing public funds effectively.”

In short, there are a lot of public sector organizations in Ontario that have no business whatsoever managing a pension plan, and their members would be better served over the long run by IMCO or another well-governed DB pension plan.

Let me be frank here, Canada as a whole has way too many small to medium-sized public pension funds that would be better served by a larger pension platform (larger pension fund) with solid governance.

I'm a big believer in amalgamation when it makes perfect sense from an administrative and performance view.

I covered IMCO's 2025 results back in April here.  

For the most part, it's a solid pension fund that is run well. 

Is it perfect? No, none of them are, but when compared to the alternatives at the municipal level, no doubt in mind members are better off joining IMCO if they have a small plan managed internally (if they're with OMERS, stay the course).

IMCO is unique among the bigger Canadian pension funds in that it still has to fight to get new clients.

A $300 million mandate from the City of Hamilton is a big mandate, even if it's focused specifically on legacy pension funds, which are distinct from its “open” pension fund managed separately by another manager.

With scale, IMCO becomes larger, can negotiate better terms and be involved in bigger deals, especially on co-investments to reduce fee drag.

Lastly, I will mention that Jennifer Hartviksen, former Head of Global Credit at IMCO, has left the organization to become the Head of Global  Fixed Income at TD Asset Management.

Fernando Martinez has replaced her, and I wish them both well in their new roles. 

Below, Amy Wu Silverman, RBC Capital Markets head of derivatives strategy, joins 'Squawk Box' to discuss hyperscalers after second-quarter earnings season, AI and more.

And Ed Yardeni, Yardeni Research, joins 'Closing Bell' to discuss Yardeni's outlook for equity markets, earnings estimates and much more.

Hugh Son of CNBC reports on how Leopold Aschenbrenner built a $45 billion AI hedge fund — and lost most of it in days:

Two years ago, Leopold Aschenbrenner argued he was one of few people in the world who saw the future clearly.

In a sprawling, 165-page essay that became required reading in Silicon Valley, the former OpenAI researcher positioned himself as a kind of prophet for the coming age of artificial super intelligence.

But this week, the limits of Aschenbrenner’s vision were on display when the AI-themed hedge fund he runs — named Situational Awareness, also the title of his viral June 2024 manifesto — ran into the harsh reality of tumbling semiconductor stocks and Wall Street margin calls.

At its peak earlier this month, his fund sat atop $45 billion in assets. By Thursday, however, after being forced to offload all of his leveraged stock bets — including hard-hit names like SK Hynix and CoreWeave — to Ken Griffin’s Citadel at a discount, the fund’s holdings plunged to around $10 billion, according to people with knowledge of the situation.

The story of Aschenbrenner’s meteoric rise and sudden fall has captivated both Wall Street and tech circles, making him the most high-profile casualty yet of the volatility accompanying the AI boom.

A polarizing figure, his online followers saw Aschenbrenner — a Columbia University valedictorian at age 19 — as a genius of the next big thing and followed his fund’s quarterly filings for clues on hot AI stocks.

Before this month’s decline, Situational Awareness racked up gains of more than 1,000% since inception, The Wall Street Journal reported last month. The Journal noted Aschenbrenner was just 24 years old.

Meanwhile, critics pointed out that Aschenbrenner had no experience running money prior to launching his fund in July 2024, calling him more lucky than smart. Some noted that his early work experience was at the doomed crypto firm FTX, where he helped now-disgraced founder Sam Bankman-Fried run a charity out of a Bahamas penthouse.

Others on Wall Street, including former traders at global investment banks, noted that in light of reports Situational Awareness used as much as 400% leverage, the collapse wasn’t shocking.

“A lot of people saw this blow-up as a matter of not if, but when,” said Jerry Diao, who runs a Wall Street coaching firm. “Maybe his views on AI are correct in the long run, but in the public markets, you have to be prepared for the short-term.”

The hedge fund didn’t immediately respond to a request for comment from CNBC.

Earlier this week, before the sale to Citadel, about two-thirds of Situational Awareness holdings were in long and short positions in public equities, according to one source. The rest were stakes in private companies, dominated by a multibillion-dollar Anthropic investment, the person said.

CNBC’s sources spoke on the condition of anonymity to discuss nonpublic details.

The near-collapse of Situational Awareness coincides with the hedge fund manager’s wedding, set for this weekend, sources told CNBC’s David Faber. Aschenbrenner is engaged to Avital Balwit, chief of staff for Anthropic CEO Dario Amodei, according to a Fortune profile. 

‘Weirdness’ and ‘disagreeableness’

Born in Germany to physician parents before moving to the U.S., Aschenbrenner showed an early aptitude for math and computer science, according to profiles and podcast interviews.

He skipped several grades in the German school system, graduating high school at age 15, and as a teen at Columbia University he garnered attention for an academic paper titled, “Existential Risk and Growth.”

A Columbia classmate, Sofia Montrone, said that she hadn’t heard of Aschenbrenner before meeting him over Zoom shortly before their 2021 graduation.

“It was not like he was some prince, emerging out of the school,” Montrone told CNBC. “He was just some guy.”

In the interaction, Montrone, who was salutatorian, said she found her classmate “child-like” and socially awkward.

Aschenbrenner has since said that his personality — what he called his own intellectual “weirdness” and “disagreeableness” — was punished in German culture. He came to see it as the source of his edge.

While at Columbia, he co-founded the school’s chapter of Effective Altruism, a philosophy popular in some tech circles that advocates for founders to make the most money possible in order to help humanity.

That network became his career pipeline, eventually leading him to work with another effective altruism proponent — Bankman-Fried — after his graduation in 2021. He worked for a stint at the Future Fund, the philanthropic arm of FTX, before the crypto firm’s collapse.

In 2023, Aschenbrenner landed on OpenAI’s Superalignment team, working under Ilya Sutskever on the problem of keeping AI aligned with human interests. After a hacker breached OpenAI’s internal systems, he wrote a memo to the board warning that the company’s security wasn’t strong enough to stop foreign espionage, naming China specifically.

In 2024, the company fired Aschenbrenner after accusing him of improperly sharing confidential information, a characterization he has disputed, saying he was raising concerns about the company’s security practices.

“I liked Leopold while at OpenAI,” Scott Aaronson, a computer scientist now at the University of Texas at Austin who previously worked on AI safety at OpenAI, told CNBC this week in an email.

“I was sorry when he got pushed out because of sharing information in a way leadership didn’t approve of,” he said. It “sounded like he was trying to do the right thing and they overreacted.”

An OpenAI spokesman declined to comment and referred to statements the company made at the time that the firm disagreed with many of Aschenbrenner’s claims.

Representatives for Columbia University and its Effective Altruism chapter didn’t respond to requests for comment.

Stripe, Github investors

Weeks after his departure from OpenAI, Aschenbrenner turned his brief experience at the leading AI firm into a sweeping vision of where artificial intelligence, and the world, was headed.

His June 2024 essay argued that artificial general intelligence could arrive within years and that governments were badly underestimating the pace of progress. Admirers saw it as evidence that Aschenbrenner was a prodigy with valuable insight into AI’s trajectory, while critics said it overstated both the technology’s near-term capabilities and his own certainty about the future.

By July of that year, Aschenbrenner parlayed his rising fame into seed capital for his hedge fund, raising a reported $225 million from Stripe co-founders Patrick and John Collison, former GitHub CEO Nat Friedman and investor Daniel Gross.

That would mark the start of a two-year run unlike any in recent Wall Street history.

“Before long, the world will wake up,” Aschenbrenner wrote at the time, adding that only a few hundred people in the AI community knew what was coming.

“If they are seeing the future even close to correctly,” he wrote, “we are in for a wild ride.”

Yun Li of CNBC also reports on why Situational Awareness hedge fund imploded, even in a tame stock market:

The stock market looked unusually tranquil. Beneath the surface, one of Wall Street’s fastest-growing funds devoted to artificial intelligence investments was unraveling.

In a matter of weeks, Leopold Aschenbrenner’s Situational Awareness went from managing roughly $45 billion to being forced into a sweeping reduction of its listed-stock positions as a historic momentum reversal triggered losses on both sides of its portfolio and set off margin calls and compulsory sales.

Situational Awareness had built concentrated positions in one of Wall Street’s most popular trades: owning companies expected to supply the chips, data centers, power and other infrastructure behind the AI boom while betting against software firms viewed as vulnerable to the technology’s disruption.

Its long positions were concentrated among some of the market’s biggest AI beneficiaries. Public filings showed large stakes in Nebius, Bloom Energy, Sandisk, CoreWeave, SharonAI and IREN as of March 31. By Wednesday’s close, those shares had fallen between by 50% and 78% from recent peaks. 

At the same time, software stocks like Adobe that had been used as the short leg of the trade rallied. That meant the fund wasn’t protected by its hedges. Instead, the longs and shorts lost money simultaneously.

“People get over leveraged in this market, and they get seduced by the big returns that some of these companies can deliver,” said Bob Lang, founder and chief strategist at Explosive Options. “If you’re not managing your risk properly, this is the sort of thing that’s going to happen to you.”

As the value of the portfolio fell, the fund’s equity cushion shrank and its prime brokers demanded additional collateral. Raising cash required selling more holdings, adding further pressure to sliding stocks and generating additional losses. What might otherwise have been a painful drawdown became a deleveraging spiral. Ken Griffin’s Citadel hedge fund reached a deal to buy the fund’s publicly traded assets.

“Running somebody out the door like this is as old as time,” Lang said. “I’ve seen it happen a lot in oil markets ... there’s a lot of things that are happening underneath the surface that we really don’t know about.”

Momentum crash

The episode offers a stark example of how a hedge fund can sustain devastating losses even when major stock indexes appear relatively calm. The S&P 500 remained near record levels as the damage unfolded, masking one of the most violent reversals in market leadership in decades.

“There is no other way to put it, we just witnessed the largest/ fastest momentum crash in modern history,” Jonathan Krinsky, chief market technician at BTIG, said in a note. “And it wasn’t particularly close.”

Morgan Stanley’s sector-neutral Momentum Index tumbled 17.4% in just four trading days, its worst such decline on record, according to BTIG. The drop surpassed the momentum reversals that followed the dot-com bust, the pandemic shock and the 2022 inflation-driven bear market.

The iShares MSCI USA Momentum Factor ETF posted its best month ever as recently as April, and is now on pace for its worst month, illustrating how quickly one of the year’s strongest strategies turned into one of its weakest.

Clearing event?

AI infrastructure stocks rebounded sharply Thursday as investors increasingly interpreted the previous several weeks of volatility as the product of a technical dislocation rather than a deterioration in the industry’s fundamentals.

With one of the market’s largest forced sellers stepping back, traders rushed into many of the same chipmakers, power companies and data-center plays that had been at the center of the selloff. The tech-heavy Nasdaq Composite jumped for a second day Friday, on track for a weekly gain of 0.9% after suffering steep losses the last two weeks.

Still, not everyone believes the forced unwind marks the end of the AI selloff.

Among the most prominent skeptics is Michael Burry of “The Big Short” fame. Burry has been one of Wall Street’s most vocal critics of the AI boom, arguing that much of the industry’s demand is being sustained by financing arrangements rather than end customers.

Rather than viewing Thursday’s rebound as a turning point, Burry used the rally to add to bearish positions in Micron, the VanEck Semiconductor ETF and Nvidia put options, according to a Thursday Substack post.

“The knee jerk reaction to the Paired Momentum unwind yesterday has been to put it back on today,” Burry wrote. “This was a historic reversal, even more so than what happened 26 years ago,” when the dot-com bubble began to burst in 2000.

Burry said oversold and overbought conditions made a short-term bounce unsurprising, but he questioned whether the trade still had staying power.

“The legs,” Burry wrote, already “they look tired.”

What an insane week full of market action!!

Let me blunt: This week is the type of volatile week elite hedge fund traders dream about. 

You had Big Tech earnings, a big Fed meeting, a big Bank of Japan meeting and currency intervention, and a major hedge fund focused on AI imploding because it was way over-leveraged in AI growth stocks.

What more can elite hedge fund traders ask for?

From the big names, Alphabet, Amazon and Microsoft added nearly $1.5 trillion in combined value this week:

Wall Street is growing increasingly divided over AI’s winners and losers after the world’s largest technology companies reported earnings and affirmed or raised their capex forecasts, suggesting the spending spree isn’t letting up yet.

Nearly $2 trillion has moved this week into or out of the six megacaps that have reported earnings this season so far. The three biggest hyperscalers, Amazon, Microsoft and Alphabet, have all seen their market caps surge after posting strong cloud growth. It suggests that investors believe returns may be in sight after the companies committed to spend billions on AI.

Microsoft gained over $600 billion in market cap this week, while Amazon and Alphabet both added more than $400 billion.

On the other end, Meta has seen its stock plunge after earnings, as investors weren’t sold on its AI investment strategy, erasing about $85 billion from its market cap this week. Apple suffered a steeper drop, losing more than $350 billion in market value, as the memory shortage weighed on its outlook. Tesla lost about $7 billion in market value after it went cash flow negative and forecast higher spending.

AI spending among the megacaps is “trending” toward almost $800 billion over the next 12 months, Jason Greenberg, co-head of global tech, media and telecom investment banking at Jefferies, told CNBC’s “Squawk on the Street” on Friday.

Investors no longer question whether people are adopting AI, or if there’s real demand for chips and compute capacity, Greenberg said.

“It’s whether in the long term demand is going to be sufficiently profitable to warrant all of this investment,” Greenberg said. “I think overall that’s the real issue that we’re struggling with right now.”

Investors are in "show-me-the-money" mode, and companies that understand this (Microsoft, Amazon) got rewarded while those who don't (Meta) got punished.

As far as the Fed, Chairman Wash spoke out of both sides of his mouth this week to justify staying put on rates despite internal dissent at the Fed. 

Maybe he knew of a major hedge fund imploding and decided this wasn't a good week to raise rates, but the longer the Fed puts off hiking rates, the bigger the risk they will hike more aggressively in the future.

As far as market action,  let me show you the 5-day chart of two of  Leopold Aschenbrenner's major holdings -- Sandisk and CoreWeave:

 

Both of them were down on Fed day (Wednesday) and then surged Thursday and Friday morning before closing red today.

Elite hedge funds -- not just Citadel, which bought Aschenbrenner's book at a discount -- knew there was blood on the Street, they were all aware of Situational Awareness's margin calls, and they pounced at the right moment to trade these stocks. 

In fact, I can tell you that shares of Sandisk were down 8% on Wednesday around noon, two hours before the Fed's decision, then were up 7% at 3 p.m. before closing down 7% that day. Then they surged over 30% Thursday and Friday morning before closing down 5% today.

It looks like short covering took place in both stocks, so I agree with Dr. Michael Burry, too soon to declare the downtrend is over. 

So, pay attention to Aschenbrenner’s positions, all 34 of them available here.

That's where the market action is these days but more broadly, pay attention to  momentum, because there too, it just looks like short covering this past week, with the downtrend intact:

I can say the same about tech shares in general, despite this week's pop (short covering?), they remain in a downtrend:

 Anyways, insane week, full of action!

Leopold Aschenbrenner's hedge fund blew up and that's not a shocker; his fund was levered four times in AI growth stocks. It's fun when they're going parabolic, but painful when momentum shifts the other way.

I've personally seen so many of these whiz kids blow up in Hedge Fund Land, and stupid investors give them money without realizing they have no money management experience or concept of risk management. 

There's a reason why I recommend all investors who invest in hedge funds read When Genius Failed, it documents how smart people do stupid things with leverage, and they all eventually succumb to Mr.Market.

Lastly, when the week began, Leopold Aschenbrenner was preparing for his wedding. The plan was for a multiday celebration in Carmel, a seaside town in Northern California, with the ceremony at a Tuscan-style villa. 

By the end of the week, his hedge fund had imploded and Ken Griffin's Citadel was there to pick up the scraps.Griffin has built a successful business profiting off the misfortunes of others. 

A good reminder of who makes the real money in Hedge Fund Land. 

Alright, that's a wrap. It's Friday and I don't think people realize everything that went on in markets this week.

Here are the top-performing large-cap US stocks this week (full list here):

And the worst-performing US large-cap stocks this week (full list here): 

Below, Bloomberg's Hema Parmar details the massive selloff of AI assets from Situational Awareness, one of the world's biggest hedge funds and how Citadel's Ken Griffin stepped in to buy the investments. Parmar said that this move is part of Griffin's 'playbook' and he will often jump in to get a good deal when firms are in distress.

Also, Karl Schamotta, chief market strategist at Corpay, joins BNN Bloomberg to discuss the markets and the outlook for the loonie.

Lastly, DoubleLine CEO-CIO Jeffrey Gundlach joins CNBC’s Scott Wapner following Federal Reserve Chairman Kevin Warsh’s second FOMC press conference. Gundlach’s read is that the market didn’t buy what Chairman Warsh was selling. 

While the Fed held rates steady, Gundlach points to the US Treasury yield curve’s sharp steepening during the press conference as the real story, undoing much of the flattening the market had rewarded Chairman Warsh with back in June. 

His view is straightforward: If Chairman Warsh is truly committed to getting inflation to 2%, and not a “whisper above,” then holding rates steady while war-driven commodity prices keep climbing is inconsistent with that goal. Gundlach argues the bond market is essentially calling that bluff and now expects the Fed to hike in September to claw back some of the credibility it just gave up.