Bank of America’s chief warns rising valuations and leverage pose risks after a high-profile AI hedge fund nearly collapsed last week.
Bank of America CEO Brian Moynihan labeled the recent near-collapse of hedge fund Situational Awareness a warning for markets driven by high valuations and leverage. The fund, led by Leopold Aschenbrenner, was forced to sell most of its public equities to Citadel in a fire sale after AI-related bets soured.
Situational Awareness had borrowed from major prime brokers, including Bank of America, Goldman Sachs, and JPMorgan Chase. Moynihan noted that while the bank would have weathered the fallout without Citadel’s intervention, the episode has prompted a review of underwriting standards amid surging stock markets.
Moynihan’s remarks signal Wall Street’s growing caution toward highly leveraged funds, even as competition to finance hedge funds remains fierce. The incident highlights risks in markets fueled by borrowed money and elevated asset prices.