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Two Sigma

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Two Sigma Investments
Company typePrivate company
IndustryInvestment management
Founded2001
FounderJohn Overdeck, David Siegel, Mark Pickard
HeadquartersSoHo, Manhattan
New York City, New York, U.S.
ProductsHedge fund
AUM$35 billion (2016)
Number of employees
900 (2016)[1]
Websitewww.twosigma.com

Two Sigma Investments 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, and manages $35 billion.

History

Two Sigma Investments was founded in 2001 by John Overdeck, David Siegel and Mark Pickard.[3][4] The company's main office is in New York City. It also has branch offices in Houston, London, and Hong Kong.[5] 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.[6]

The fund size has grown steadily, reaching about $8 billion in November 2011,[7] $20 billion in July 2014,[3] and $23 billion in October 2014.[8]

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.[9] 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.[10]

Fund information

With $25 billion in assets,[8] 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][11] 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.[8]

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.[12]
  • 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.[13]
  • Two Sigma Advisers LLC manages money for pension plans, sovereign funds, and other institutional clients.[8]
  • Two Sigma Securities LLC is a high frequency broker-dealer.

People

Two Sigma Investments was founded in 2001 by John Overdeck, and David Siegel.[3][4] 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.[14]

Mark Pickard served as the President of the firm from its inception until his retirement in 2006.[6]

Controversies

Accessing and duplicating confidential information

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.[15] The case is New York. v. Kang Gao. Gao spent 8 months in jail as of October 2014.[15] In February 2015, Gao pleaded guilty to “illegally accessing and duplicating proprietary and confidential information related to the firm’s trading methods.” [16] [17]

Investigation into high-frequency trading practices

In July 2014, Reuters reported that Two Sigma was one of ten companies being targeted by the U.S. Securities and Exchange Commission in their probe into high-frequency trading practices.[18]

See also

References

  1. ^ "About Two Sigma". Retrieved 7 February 2016.
  2. ^ "Two Sigma Investments". Retrieved 31 July 2014.
  3. ^ a b c d e Vardi, Nathan (11 July 2014). "Two Sigma Investments Is Having a Great Year And Becoming A Hedge Fund Powerhouse". Forbes. Retrieved 31 July 2014. {{cite web}}: Italic or bold markup not allowed in: |publisher= (help)
  4. ^ a b "Two Sigma Investments". Bloomberg BusinessWeek. Retrieved 31 July 2014. {{cite web}}: Italic or bold markup not allowed in: |publisher= (help)
  5. ^ "Contact". Two Sigma Investments. Retrieved 31 July 2014.
  6. ^ a b "About Two Sigma". www.twosigma.com. Two Sigma.
  7. ^ Copeland, Rob (1 November 2011). "Two Sigma readies new global equity fund". Retrieved 31 July 2014.
  8. ^ a b c d Foxman, Simone (30 October 2014). "Two Sigma Raises $3.3 Billion for New Macro Hedge Fund". Business Week.
  9. ^ "Stephen Hannahs, Two Sigma Private Investments Join to Create Wings Capital Partners, a Commercial Aviation Private Equity, Investment, Advisory and Financing Company". Yahoo! Finance. 7 October 2013. Retrieved 31 July 2014.
  10. ^ Dugan, Kevin (2 July 2014). "Citi loses equity-derivatives chief to Two Sigma Investments". New York Post. Retrieved 31 July 2014. {{cite web}}: Italic or bold markup not allowed in: |publisher= (help)
  11. ^ "Two Sigma Investments/Two Sigma Advisers". Retrieved 31 July 2014.
  12. ^ "Two Sigma Private Investments". Retrieved 31 July 2014.
  13. ^ "Two Sigma Ventures". Retrieved 31 July 2014.
  14. ^ "About". Two Sigma Investments. Retrieved 31 July 2014.
  15. ^ a b Bishop, Stewart (14 October 2014). "Ex-Two Sigma Analyst Can't Dodge IP Trial, But Bail Is Cut". law360.
  16. ^ "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. 24 February 2015. Retrieved 16 June 2015.
  17. ^ Dolmetsch, Chris (24 February 2015). "Former Two Sigma Analyst Gao Pleads Guilty to Software Theft". New York: Bloomberg L.P. Retrieved 16 June 2015.
  18. ^ McCrank, John (17 July 2014). "Exclusive: SEC targets 10 firms in high frequency trading probe - SEC document". Retrieved 31 July 2014.
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