It would seem that using history as a tool to avoid future mistakes is something we all take for granted, but sadly, that is not the case. Although we are rational beings, emotions can have far more influence over our decisions than we even imagine.

Have you heard about the hedge fund Situational Awareness?

It is a truly fascinating story because it involves a lot of money—in fact, an enormous amount of money—extraordinary returns, a child prodigy, plenty of leverage and, eventually, a great deal of money lost.

The founder is Leopold Aschebrenner, who was born in Germany and, according to Wikipedia, graduated from Columbia at age 19 as valedictorian (one of its top students). He worked at FTX, then at OpenAI (ChatGPT), was fired and wrote an essay titled “Situational Awareness.” It attracted considerable interest from people such as the founders of Stripe, and he decided to launch a hedge fund under the same name. In a very short time, his returns attracted more attention, and the fund went from managing $250 million in 2024 to reaching $45 billion in assets in July 2026. Spectacular returns and extraordinary asset growth all pointed to a brilliant individual who had managed to beat the market.

What happened next?

The investments were leveraged, and as prices fell, the fund began receiving margin calls. What does that mean? A leveraged $1 position can be worth $2 or more. If I earn 50% using that leverage (borrowed money), I receive $1, which represents a 100% return on my original $1 investment. Now imagine that instead of 1X, I use 2X or 3X. A 25% return can turn into 75%! That is how spectacular gains—or losses—happen.

Now, up to this point, there is nothing wrong, and I am not criticizing what was done. What I want to share, and my reason for writing about this subject, is a reminder of how easy it is to be drawn into these investments when we hear about incredible returns and all-knowing “geniuses.” This genius is 24 or 25 years old and is undoubtedly brilliant. The problem is that many people do not pay attention to what is being done with their money and let their guard down because this is the person who achieved this or that, or worked for a particular company. Yes. His credentials are excellent, but does that mean his goals align with yours? Not necessarily! Apparently, the fund continues operating after Citadel stepped in to buy a large part of the portfolio, which lost approximately $35 billion following the declines and margin calls. I am convinced that some people knew what they were exposing themselves to and were willing to tolerate such sharp swings. But there must also be others who did not expect to lose a large part of their investment in a single month because they simply trusted.

Personally, I appreciate and take very seriously the trust each client places in me. Wealth is deeply personal, and I understand the great responsibility I am given to guide each person. I will always look after their interests and goals, and I will strive to be as clear as possible about the risks involved in each investment.

Have a great start to the week, and do not hesitate to contact me with any questions or comments.