Two Sigma

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Two Sigma Investments
Private company
Industry Investment management
Founded 2001; 17 years ago (2001)
Founder John Overdeck, David Siegel, Mark Pickard
Headquarters New York, New York, U.S.
Products Hedge fund
AUM $51 billion (2017)
Number of employees
1200 (2018)[1]
Website www.twosigma.com

Two Sigma Investments LP is a New York City-based hedge fund that uses a variety of technological methods, including artificial intelligence, machine learning, and distributed computing, for its trading strategies.[2][3] The firm is run by John Overdeck and David Siegel.[4][2][3]

History[edit]

Two Sigma Investments was founded in 2001 by John Overdeck, David Siegel and Mark Pickard.[3][5] The company's main office is in New York City. It also has branch offices in Houston, London, and Hong Kong.[6] According to Two Sigma, the firm's name "Two Sigma" was chosen to reflect the duality of the word sigma. A lower case sigma, σ, designates the volatility of an investment's return over a given benchmark, and an upper case sigma, Σ, denotes sum. By adding together the volatilities of individual positions measured against the benchmark, Two Sigma can amplify forecast signals, the company's website says.[7]

The fund managed around $8 billion in November 2011, $23 billion in October 2014, and $32 billion by the end of 2015.[8][3][9][10]

In October 2013, Two Sigma Private Investments announced that it was joining with Stephen Hannahs to form Wings Capital Partners, a commercial aviation private equity, investment, advisory and financing company.[11] In July 2014, it was announced that Simon Yates, Citigroup's global head of equity derivative sales and trading, left the bank to join Two Sigma.[12][13]

In 2016, Two Sigma Investments ranked 11th on Penta's Top 100 Hedge Funds.[14]

As of early 2017, Two Sigma had used crowdsourcing options to find trading signals.[15] By March 2017, the fund was running a competition on Kaggle to code a trading algorithm.[16] As of October 2017, the fund had assets reaching more than $50 billion.[17]

Technology[edit]

Halite I[edit]

At the end of 2016 Two Sigma Investments introduced an artificial intelligence challenge called Halite. Halite is a programming game inviting coding enthusiasts to build smart bots whose goal is to gain control of a virtual grid.[18][19][20]

Halite II[edit]

Due to the success of Halite I, Two Sigma decided to develop a second season of Halite called Halite II. This ran from October 2017 to January 2018, and in this version players competed for control of planets using ships in space.[21]

Fund information[edit]

Two Sigma has been noted in the business press for its unusually high rate of return, comparable to its older and more mature competitors D. E. Shaw & Co. and Renaissance Technologies.[3][22] In October 2014, Two Sigma had raised $3.3 billion for a macro hedge fund in one of the largest new pools of such capital raised since the 2008 financial crisis.[9]

There are a few specialized divisions:

  • Two Sigma Private Investments (Two Sigma Pi) focuses on private equity, credit and special opportunities, real estate, real assets and natural resources, and venture capital.[23]
  • Two Sigma Ventures focuses on venture capital investments in companies, with a focus on companies operating in the realm of data science, machine learning, and artificial intelligence.[24]
  • Two Sigma Advisers LLC manages money for pension plans, sovereign funds, and other institutional clients.[9]
  • Two Sigma Securities LLC is a high frequency broker-dealer.

People[edit]

Two Sigma Investments was founded in 2001 by John Overdeck, and David Siegel.[3][5] Co-founder David Siegel is a computer science Ph.D. from the Massachusetts Institute of Technology and held the position of Chief Information Officer for D. E. Shaw & Co. prior to starting Two Sigma. The other co-founder, John Overdeck, is an International Mathematical Olympiad Silver Medalist who subsequently studied mathematics and then rose to the position of Managing Director at D. E. Shaw prior to leaving to co-found Two Sigma.[25]

Mark Pickard served as the President of the firm from its inception until his retirement in 2006.[7]

Controversies[edit]

Accessing and duplicating confidential information[edit]

In February 2014, Forbes reported that former Two Sigma employee Kang Gao, age 29, was prosecuted by the Manhattan District Attorney and is accused of using a remote-access device to view Two Sigma's proprietary trading models and emailing this information to his personal email account, lifting quantitative trading strategies, trading models, a marketing presentation, and a scientific white paper.[26] The case is New York. v. Kang Gao. Gao spent 8 months in jail as of October 2014.[26] In February 2015, Gao pleaded guilty to “illegally accessing and duplicating proprietary and confidential information related to the firm’s trading methods.”[27][28]

See also[edit]

References[edit]

  1. ^ "About Two Sigma". Retrieved March 4, 2018. 
  2. ^ a b "Two Sigma Investments". Retrieved July 31, 2014. 
  3. ^ a b c d e f Vardi, Nathan (July 11, 2014). "Two Sigma Investments Is Having a Great Year And Becoming A Hedge Fund Powerhouse". Forbes. Retrieved July 31, 2014. 
  4. ^ The World's 100 richest Hedge Funds, Bloomberg Markets
  5. ^ a b "Two Sigma Investments". Bloomberg BusinessWeek. Retrieved July 31, 2014. 
  6. ^ "Contact". Two Sigma Investments. Retrieved July 31, 2014. 
  7. ^ a b "About Two Sigma". www.twosigma.com. Two Sigma. 
  8. ^ Copeland, Rob (November 1, 2011). "Two Sigma readies new global equity fund". Retrieved July 31, 2014. 
  9. ^ a b c Foxman, Simone (30 October 2014). "Two Sigma Raises $3.3 Billion for New Macro Hedge Fund". Business Week. 
  10. ^ Vardi, Nathan. "Top Quant Hedge Funds Stand Out With Good 2015". Forbes. Retrieved 25 June 2016. 
  11. ^ "Stephen Hannahs, Two Sigma Private Investments Join to Create Wings Capital Partners, a Commercial Aviation Private Equity, Investment, Advisory and Financing Company". Yahoo! Finance. October 7, 2013. Retrieved July 31, 2014. 
  12. ^ Dugan, Kevin (July 2, 2014). "Citi loses equity-derivatives chief to Two Sigma Investments". New York Post. Retrieved July 31, 2014. 
  13. ^ "Citi Equity Derivatives Head Yates Said to Join Two Sigma". 2 July 2014 – via www.bloomberg.com. 
  14. ^ "Penta Top 100 Hedge Funds". Barron's. June 17, 2017. Retrieved 5 November 2017. 
  15. ^ Wigglesworth, Robin (October 17, 2017). "Cohen-backed Quantopian starts fund for outside investors". The Financial Times. United Kingdom. Retrieved October 29, 2017. 
  16. ^ Wigglesworth, Robin (March 8, 2017). "Hedge funds adopt novel methods to hunt down new tech talent". The Financial Times. United Kingdom. Retrieved October 29, 2017. 
  17. ^ Wigglesworth, Robin (October 23, 2017). "Two Sigma rapidly rises to top of quant hedge fund world". The Financial Times. United Kingdom. Retrieved October 29, 2017. 
  18. ^ "Two Sigma Announces Public Launch of Halite, A.I. Coding Game". Cornell Tech. Retrieved 2017-09-10. 
  19. ^ "Halite: An AI Programming Challenge | Hacker News". news.ycombinator.com. Retrieved 2017-09-10. 
  20. ^ Sigma, Two. "Introducing Halite: Our Limited Release AI Challenge". Two Sigma. Retrieved 2017-09-10. 
  21. ^ "Halite II". Halite. Retrieved 2018-01-23. 
  22. ^ "Two Sigma Investments/Two Sigma Advisers". Retrieved July 31, 2014. 
  23. ^ "Two Sigma Private Investments". Retrieved July 31, 2014. 
  24. ^ "Two Sigma Ventures". Retrieved July 31, 2014. 
  25. ^ "About". Two Sigma Investments. Retrieved July 31, 2014. 
  26. ^ a b Bishop, Stewart (14 October 2014). "Ex-Two Sigma Analyst Can't Dodge IP Trial, But Bail Is Cut". law360. 
  27. ^ "DA VANCE: KANG GAO PLEADS GUILTY TO COPYING CONFIDENTIAL TRADING INFORMATION FROM HIS FORMER EMPLOYER" (Press release). The New York County District Attorney's Office. February 24, 2015. Retrieved June 16, 2015. 
  28. ^ Dolmetsch, Chris (February 24, 2015). "Former Two Sigma Analyst Gao Pleads Guilty to Software Theft". New York: Bloomberg L.P. Retrieved June 16, 2015. 

External links[edit]