Two Sigma Investments, the quant hedge-fund giant known for using computer-driven algorithms to make money, is for the first time exploring ways to add traders who rely on their human judgment to make money as the $60 billion investing firm looks to diversify its strategies.
(Bloomberg) — Two Sigma Investments, the quant hedge-fund giant known for using computer-driven algorithms to make money, is for the first time exploring ways to add traders who rely on their human judgment to make money as the $60 billion investing firm looks to diversify its strategies.
New York-based Two Sigma, which uses machine learning and big data to make systematic trades, has hired some staff and is interviewing traders and researchers, according to people familiar with the matter. The move into discretionary investing will target talent for equities, macro and fixed-income investments, one of the people said, asking not to be identified because the details are private.
There’s no immediate plan to start a discretionary hedge-fund product similar to those offered by peers such as D.E. Shaw & Co., Millennium Management or Citadel, the person said. The new hires will work across multiple teams to complement the quant businesses, they said.
Two Sigma is vying for talent amid fierce competition among the world’s largest hedge funds for the best money markers, leading to rising payouts, conflicts, litigation and punitive measures in efforts to hire and retain the biggest names.Â
Two Sigma is not alone in seeing the merits of adding discretionary elements to its investment strategies that involves a human trader using analysis and experience to evaluate risk, pricing and timing to put on bets. Investment firms such as Man Group Plc and D.E. Shaw, who trace their roots back to systematic trading, have evolved into giants using both discretionary and quant strategies.
A representative for Two Sigma declined to comment.
Two Sigma was founded in 2001 by David Siegel, who has a doctorate in computer science from the Massachusetts Institute of Technology, and John Overdeck, a mathematician who worked with Jeff Bezos at Amazon.com Inc. The two billionaires are currently engaged in a rift over the firm’s organization, succession plans and other disputes that could pose a threat to its clients, the firm has said in a regulatory filing.  Â
It has been one of the industry’s fastest-growing firms, with assets soaring from $2.5 billion over a decade ago and employing more than 2,000 staff worldwide. In addition to hedge fund investing, Two Sigma also operates venture capital, private equity, impact investing, market-making and insurance businesses.
Two of the firm’s biggest funds, Two Sigma AR and Spectrum, generated 2.6% and 2.9% returns respectively during the first half of the year, the people said. Hedge funds on average made 3.1% during the period, according to data compiled by Bloomberg.
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