Secretive hedge fund makes big AI bet
Secretive hedge fund goes big on AI
A secretive credit hedge fund known for its bets during the 2008 financial crisis is benefiting from one of the best returns of the year, fuelled by CoreWeave, a provider of artificial intelligence infrastructure.
The hedge fund Magnetar has resurfaced on Wall Street with a canny wager on CoreWeave that has generated massive paper profits and driven its returns to about 56 per cent this year, write Amelia Pollard, Eric Platt, James Fontanella-Khan and Tabby Kinder.
The hedge fund’s gains have largely been generated by its stake in the AI data centre operator, which was worth more than $11bn in August.
Within just six months, Magnetar’s investment in CoreWeave has become by far the largest position in its portfolio, with about half of its total assets tied up in the New Jersey-based group’s equity. However, its overall investment in CoreWeave was only about $500mn, according to two people familiar with the matter.
Magnetar was co-founded in 2005 by former Citadel executive Alec Litowitz and former Glenwood Capital Partners president Ross Laser. The firm cemented its name during the financial crisis by making a windfall through short positions on subprime mortgages.
The hedge fund’s investment in CoreWeave, which has its roots in a series of loans, has multiplied in size as the data centre operator’s shares have surged more than 120 per cent since the company went public in March on the back of market enthusiasm for AI stocks.
Still, the outsized bet has caught some institutional investors off guard, particularly those that had turned to Magnetar for its expertise in debt markets. They are now looking at a fund that appears more akin to a venture capital or growth equity investor with billions of dollars staked on the fate of a single tech company.