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Two Sigma

Two Sigma Investments, LP is a New York City-based and firm founded in 2001 by and , which applies scientific methods, , and advanced to quantitative strategies across markets. The firm manages approximately $110 billion in as of August 2025, employing approximately 1,700 people, more than 700 of whom hold advanced degrees and over 250 possess PhDs, with a focus on rigorous inquiry and data-driven decision-making. Headquartered in with offices in , , and , Two Sigma operates several core businesses, including Two Sigma Investments for diversified strategies, Two Sigma Securities for and market-making, and Two Sigma for data-driven investments in property sectors. The company processes over 380 petabytes of data as of 2025 and leverages computing power among the world's top five sites, running more than 110,000 simulations daily to inform its approaches. In August 2024, co-founders Siegel and Overdeck transitioned from their roles as co-CEOs to co-chairmen, with Carter Lyons and Scott Hoffman appointed as the new co-CEOs, amid internal leadership changes; Overdeck returned to the management committee in April 2025, while the co-founders continue to guide the firm's direction.

Overview

Founding and Founders

Two Sigma Investments was founded in 2001 in New York City by computer scientist David Siegel, mathematician John Overdeck, and Mark Pickard. Siegel, who earned a Ph.D. in computer science from MIT, had previously served as the first chief information officer at D.E. Shaw & Co., where he worked alongside early figures like Jeff Bezos. Overdeck, holding a B.S. and M.S. in mathematics from Stanford University, rose to managing director at D.E. Shaw & Co., overseeing equity and equity-linked investments, including in Japan. Pickard, formerly chief financial officer at Tudor Investment Corporation, joined as an initial partner and served as the firm's first president. The firm received seed funding from through his Tudor Investment Corporation, which provided initial backing after Overdeck pitched the idea to Jones over a casual meeting. This support enabled the launch of Two Sigma's first market-neutral fund in April 2002, emphasizing high-turnover strategies driven by . Pickard retired from the firm in 2006, leaving and Overdeck to lead its ongoing operations. From its inception, Two Sigma focused on quantitative trading, employing mathematical models and early techniques to identify opportunities by processing vast datasets and generating statistical insights. This foundation in rigorous, technology-driven analysis has since evolved into broader applications of in .

Mission and Core Approach

Two Sigma's mission centers on applying rigorous scientific methods, advanced technology, and to , aiming to generate consistent alpha and address complex financial challenges. The firm seeks to solve the toughest problems in by combining a powerful computational platform with intense scientific rigor, leveraging data-driven insights to uncover persistent market signals and optimize portfolios for superior risk-adjusted returns. At its core, Two Sigma integrates , , and domain expertise to process vast datasets, enabling predictive modeling that informs decisions across global markets. This scientific approach emphasizes hypothesis-driven , where teams formulate testable ideas, conduct and experimentation, and iteratively refine models based on , much like the applied to financial phenomena. The firm fosters collaboration among multidisciplinary teams of , engineers, and traders, drawing on diverse perspectives to expand and tackle problems collectively. By nurturing from varied backgrounds, Two Sigma promotes a culture of curiosity and systematic inquiry, ensuring that innovative solutions emerge from shared expertise rather than isolated efforts. Two Sigma maintains a commitment to ethical use through its established Code of Ethics, which governs practices including handling and personal trading to uphold integrity in operations, while prioritizing long-term value creation for clients via sustainable, alpha-generating strategies.

Current Scale and Global Presence

Two Sigma manages more than $70 billion in (AUM) as of October 2025, reflecting its position as a leading quantitative investment firm. This figure represents the firm's total across public and private strategies, with a diversified portfolio in global equities, , and other . The AUM has experienced minor fluctuations in recent years due to market conditions and fund restructurings, such as the closure of legacy funds in 2025. The firm employs approximately 1,700 people worldwide, with a strong emphasis on technical expertise; over 700 hold advanced degrees, and more than 250 possess PhDs, primarily in fields such as physics, , and . This workforce includes more than 1,000 data scientists and engineers who drive the company's data-intensive approach to investments. Two Sigma's global footprint supports its operations through headquarters in and additional offices in Houston, , and Palm Beach Gardens in ; London in Europe; and , , and in . Two Sigma serves a primarily institutional client base, including pension funds, endowments, foundations, and sovereign wealth funds from around the world.

History

Early Years and Establishment (2001-2010)

Two Sigma commenced operations in 2001 with a small team in , concentrating on and quantitative strategies primarily in equities and futures markets. The firm launched its inaugural fund, the Two Sigma Fund, in April 2002 as a market-neutral vehicle employing high-turnover techniques to exploit short-term pricing inefficiencies derived from vast datasets. This initial approach aligned with the founders' vision for data-driven investing, emphasizing algorithmic models over traditional . To build its foundational capabilities, Two Sigma prioritized recruiting PhDs in fields like , , and physics, alongside software engineers skilled in and . These early hires were instrumental in developing proprietary systems for cleaning, analyzing, and modeling large-scale financial data, enabling the firm to process terabytes of information daily and generate predictive signals for trading. By mid-decade, the team had expanded modestly but remained focused on technical expertise to support scalable quantitative models. The early years were marked by significant challenges, including the lingering volatility from the post-dot-com market crash, which tested the resilience of nascent quantitative strategies amid erratic equity movements. Additionally, establishing credibility in the competitive quantitative investment landscape proved difficult, as investors were skeptical of unproven tech-heavy approaches from a startup firm. The 2007 "quant quake"—a period of correlated losses across funds—further strained operations, forcing Two Sigma to refine risk models and demonstrate robustness. Despite these hurdles, the firm navigated them by iterating on data infrastructure and maintaining a disciplined, scientific methodology. Key milestones during this period included achieving the firm's first positive returns in , with double-digit gains that validated its core strategies amid a recovering . By 2004, Two Sigma expanded beyond pure equities by launching the fund, incorporating elements like futures and to diversify signals. This evolution culminated in a shift to multi-strategy approaches by , integrating equities, , and other across a broader of funds, solidifying its operational foundation.

Growth and Key Milestones (2011-2020)

During the period from 2011 to 2020, Two Sigma underwent substantial expansion, driven by successful , strategic product launches, and investments in talent and technology. The firm's (AUM) grew rapidly, reflecting investor confidence in its quantitative strategies. In 2011, Two Sigma managed approximately $6 billion in AUM. By October 2014, this figure had risen to $23 billion, supported by strong performance and new capital inflows. The AUM continued to climb, reaching $32 billion by the end of 2015, surpassing $50 billion in 2017, and hitting $60 billion by May 2019. Key milestones highlighted Two Sigma's diversification into new investment areas. In 2013, the firm partnered with aviation executive R. Stephen Hannahs to launch Wings Capital Partners, a private investment vehicle focused on assets, marking Two Sigma's entry into specialized opportunities. The following year, in October 2014, Two Sigma raised $3.3 billion for a new macro —one of the largest such launches since the —expanding its offerings beyond traditional equity and futures strategies into global macroeconomic bets. By 2020, amid the COVID-19-induced market downturn, Two Sigma navigated volatility with relative resilience; although its absolute-return macro fund declined 23% and the broader absolute-return strategy fell 2.7%, the firm maintained AUM at $58 billion by October, underscoring the stability of its diversified portfolio. Strategically, Two Sigma broadened its operations to include high-frequency trading and institutional advisory services. Through its broker-dealer arm, Two Sigma Securities, the firm deepened involvement in systematic market-making and intraday trading, positioning itself as a key liquidity provider across equities, options, and futures; by 2017, it was actively expanding in the competitive high-speed trading landscape. In parallel, Two Sigma entered institutional advisory with the 2019 launch of Venn, a risk analytics platform tailored for endowments, foundations, and pensions to optimize multi-asset portfolios. Geographically, the firm established a stronger international footprint, growing its London office—opened in 2008—from a small team to over 100 staff by the mid-2010s, while adding presences in Hong Kong and Shanghai to tap Asian markets. Internally, Two Sigma scaled its capabilities to support this . The employee base expanded from around 400 in 2011 to 1,200 by 2017, with a significant portion dedicated to and roles. This workforce enabled enhancements in , allowing the firm to process vast datasets for model development and handle the computational demands of increasingly complex strategies.

Leadership Transitions and Recent Events (2021-2025)

In 2023, Two Sigma faced reports of internal leadership tensions between co-founders and co-CEOs and , which the firm disclosed as a material risk in a regulatory filing, potentially impacting and . These discord issues, building over years, contributed to a shakeup as the firm navigated strategic differences amid competitive pressures in quantitative investing. The tensions culminated in August 2024 when Overdeck and announced they would step down from day-to-day management as co-CEOs effective September 30, 2024, while remaining as co-chairs of the board. To lead the transition, Carter Lyons, the firm's long-serving chief business officer, and Scott Hoffman, a former senior executive at , were appointed as co-CEOs, aiming to streamline decision-making and foster stability. This shift marked a generational change at the $60 billion firm, with the new leadership emphasizing and in response to evolving market dynamics. In November 2024, the firm laid off about 200 employees as part of a strategic review to enhance efficiency. In 2025, Two Sigma continued to integrate more deeply into its trading strategies to address heightened market volatility, including fluctuations driven by geopolitical tensions and uncertainties. Operationally, the firm announced the winding down of its $120 million Eclipse legacy fund by December 31, 2025, a small but outdated vehicle, to simplify its overall fund structure and redirect resources toward scalable, technology-enabled platforms. Despite these adjustments and broader economic pressures, Two Sigma maintained over $60 billion in through the year.

Organizational Structure

Leadership and Governance

Two Sigma's executive leadership is currently headed by Co-Chief Executive Officers Carter Lyons and Scott Hoffman, effective September 30, 2024. Lyons, who has spent over 13 years at the firm in roles including and Co-Head of Two Sigma Advisers, focuses on operational aspects such as business expansion, client relationships, product development, and activities. Hoffman, previously Chief Administrative Officer and General Counsel at for 30 years, concentrates on , legal , administrative oversight, and strategic transactions including . The co-founders, and , transitioned from their Co-CEO roles to serve as non-executive Co-Chairmen, where they provide ongoing strategic guidance rooted in their expertise in quantitative investing, , and technology innovation. In April 2025, Overdeck rejoined the firm's management committee while the Co-CEOs retained oversight of daily operations. This structure supports firm-wide decision-making while allowing the executive team to handle day-to-day operations. Two Sigma's is led by the Co-Chairmen and includes key figures with backgrounds in and . As a firm, detailed public disclosures on board composition are limited, but the structure emphasizes expertise in and quantitative methods to align with the company's scientific approach to . practices at Two Sigma include dedicated risk oversight mechanisms, exemplified by the Risk Committee at its UK subsidiary, Two Sigma Securities UK Limited, which is chaired by the and meets quarterly to review strategy, appetite, and compliance based on board-approved policies. The firm integrates (ESG) considerations into its processes and , monitoring ESG-related risks across portfolios as part of broader ethical and compliance frameworks. Succession planning is embedded in Two Sigma's to maintain continuity in quantitative expertise following founder transitions, as demonstrated by the 2024 leadership changes that appointed internal and external leaders to key roles, including Ali-Milan Nekmouche as of Two Sigma Investments. This approach ensures sustained focus on data-driven strategies amid evolving market dynamics.

Divisions and Subsidiaries

Two Sigma operates through several key divisions focused on its core , each leveraging the firm's shared and infrastructure while maintaining distinct operational and profiles. The primary division, Two Sigma Investments, LP, handles the firm's core operations, employing quantitative models and to manage investments across markets. This division, headquartered in , oversees the development of investment strategies, portfolio construction, and execution, drawing on a vast proprietary library from over 10,000 sources. Complementing this, Two Sigma Advisers, LP, serves as the institutional client services arm, providing customized investment advisory solutions to external clients such as pension funds and endowments, with a focus on diversified portfolio management. These investment-focused units share research resources, including models and computational tools, to enhance decision-making across the firm. In addition to its divisions, Two Sigma maintains a dedicated unit within Two Sigma Securities, LLC, which specializes in low-latency strategies for equities, , and options markets. This unit provides through systematic market-making and execution services, over 300 million shares daily via proprietary platforms. It operates with independent to isolate trading activities from the broader portfolios, yet benefits from the firm's centralized pipelines for signal generation. Two Sigma's subsidiaries extend its reach into private markets and , forming an interconnected private investments group. Two Sigma Ventures, established in 2012 as an early-stage firm, invests in data-driven startups across sectors like , , and biotech, with a portfolio exceeding 100 companies; it provides not only capital but also technical expertise from Two Sigma's research teams. Sightway Capital, the arm launched in 2019, focuses on building and scaling companies in , credit, and natural resources, having raised $1.2 billion for its debut fund to support principal investments alongside management teams. Similarly, Two Sigma , initiated in 2021, targets private assets using analytics for opportunity identification and , recently expanding to external capital raises while integrating firm-wide quantitative tools. These subsidiaries maintain separate but collaborate on resources, enabling cross-pollination of innovations without overlapping risk exposures.

Investment Operations

Investment Strategies

Two Sigma employs a range of quantitative strategies rooted in data-driven and algorithmic models to generate returns across various market conditions. Central to its approach is , which involves identifying and exploiting temporary pricing inefficiencies between related securities using statistical models to predict mean reversion. This strategy, a core component since the firm's , relies on high-frequency to execute trades that aim to profit from deviations in asset prices while minimizing exposure to broader market movements. Complementing this are market-neutral equity strategies, designed to isolate returns from stock-specific factors while hedging against overall through long and short positions in . These approaches seek alpha from and data signals, such as earnings patterns or sentiment indicators, without directional bets on equity indices. Additionally, Two Sigma utilizes macro , which applies predictive algorithms to global economic indicators, interest rates, and geopolitical events to trade futures and other derivatives across . Options volatility models form another pillar, modeling surfaces to trade options and related instruments, capturing premiums from volatility forecasts derived from historical and real-time . The firm's multi-asset focus spans equities, , commodities, and currencies, employing predictive algorithms to uncover cross-asset correlations and opportunities for diversified alpha generation. This broad mandate allows for simultaneous trading across global markets, leveraging vast datasets to identify signals that transcend single-asset boundaries. is integral, emphasizing diversification through orthogonal factors that isolate sources of and , thereby reducing correlation-driven drawdowns. controls limit per and overall , while monitoring systems adjust positions dynamically to mitigate ; for instance, sigma-based signal scales sizes according to statistical levels derived from deviation thresholds. These mechanisms ensure resilience against market shocks by maintaining balanced risk budgets across strategies. In the 2020s, Two Sigma has shifted toward AI-enhanced strategies, integrating techniques such as and generative models to detect non-linear patterns in , improving predictive accuracy for complex market regimes. This evolution builds on longstanding quantitative foundations, enhancing traditional models with to adapt to evolving data landscapes and computational advances.

Funds and Performance

Two Sigma's portfolio includes several flagship funds focused on quantitative and systematic investment approaches. The Spectrum Fund serves as the firm's primary diversified quantitative vehicle, employing data-driven models across global equities and other . The Absolute Return Enhanced Fund adopts a multi-strategy framework, integrating equity market-neutral, , and opportunistic trades to generate returns uncorrelated with broader market movements. Additionally, in 2014, Two Sigma launched a model-driven macro fund, raising $3.3 billion to pursue directional bets on currencies, commodities, and fixed income based on econometric signals. These funds primarily utilize long-short structures to manage and exploit inefficiencies, alongside market-neutral and private investment vehicles for select opportunities; they typically charge a standard fee of 2% on and 20% on performance above a hurdle rate. In its early years, Two Sigma's funds demonstrated strong performance through quantitative innovation; for instance, the Absolute Return Fund achieved net returns of 10.06% in amid volatile markets. During the downturn, results were mixed but highlighted strategy-specific resilience, with the Absolute Return Fund incurring a modest loss of 1.24% while the Spectrum Fund gained 6.71%. From 2023 to 2025, the funds maintained stability despite rate hikes and economic uncertainty, delivering consistent positive returns: the Enhanced Fund posted 12% in 2023 and 14.3% in 2024, while the Fund returned 8.6% in 2023 and 10.9% in 2024, with the latter up 7.6% in the first half of 2025 alone. In November 2025, the firm's Dingliang Index Enhanced Strategy, focusing on the Smallcap 500 Index, gained 52.5%, enabling Two Sigma to join the elite ranks of hedge funds and attract substantial new investments. In October 2025, Two Sigma announced the wind-down of its legacy Fund, a small $120 million vehicle trading equities and futures since the early 2000s, with all interests to be compulsorily redeemed by December 31, 2025, to streamline the overall fund lineup. The core funds—, Enhanced, and macro strategies—account for the majority of the firm's assets, supporting its diversified approach to capital allocation.

Technology and Research

Technological Infrastructure

Two Sigma's technological is built on massive computational resources designed to support high-frequency and . The firm's computing power is equivalent to one of the world's top five sites, enabling the processing of complex algorithms at scale. This includes over 600 petabytes of storage capacity, which supports the storage and retrieval of vast datasets essential for modeling financial markets. Daily operations involve running more than 110,000 , allowing for rapid iteration and testing of investment hypotheses. Central to this setup is Two Sigma's system, which handles more than 380 petabytes of from diverse sources, including traditional market feeds and alternative datasets such as and consumer behavior signals. The firm draws from over 10,000 sources to ensure comprehensive coverage of global financial and economic indicators. To manage this volume, Two Sigma employs architectures, including proprietary systems like Smooth Storage for structured time-series and CelFS for geo-distributed archival , which provide and across petabyte-scale operations. The software stack underpinning these capabilities consists of proprietary platforms tailored for model development, deployment, and . These internal tools facilitate the seamless integration of data pipelines with predictive models, enabling engineers to simulate historical scenarios and deploy algorithms into live trading environments. Such platforms are critical for maintaining the firm's in quantitative investing, where and validation are paramount. Security has been a focal point, particularly following pre-2025 vulnerabilities in model access that were identified but not promptly remediated. In response to regulatory scrutiny, Two Sigma addressed these issues post-incident by implementing enhanced encryption protocols and rigorous auditing processes to safeguard proprietary models and sensitive data. These measures now ensure compliance with investment adviser standards, protecting against unauthorized access while supporting secure data flows across the infrastructure.

Innovations and Community Engagement

Two Sigma has actively engaged the broader technology community through initiatives like the AI programming competitions, which began in 2016 as an internal challenge before expanding globally to crowdsource innovative algorithms for strategic decision-making in a multiplayer game environment. II, launched in October 2017 and running through January 2018 in partnership with , invited participants worldwide to develop AI bots using languages of their choice, fostering collaborative learning in and advanced algorithms—skills directly applicable to quantitative trading strategies. Over 15,000 individuals from diverse backgrounds participated across seasons, highlighting Two Sigma's commitment to democratizing access to AI and idea generation for financial applications. In the realm of blockchain technology, Two Sigma Securities became a data provider for Chainlink's decentralized oracle networks in October 2022, operating as a to deliver high-quality financial , such as derivatives pricing, to support secure and tamper-resistant inputs for s. This involvement enhances the reliability of blockchain-based hybrid applications by bridging traditional financial datasets with decentralized systems, enabling more robust services for DeFi and other use cases. By leveraging its quantitative expertise, Two Sigma contributes to the ecosystem's growth, ensuring accurate off-chain feeds that underpin execution without centralized vulnerabilities. Two Sigma's open-source efforts emphasize tools that advance workflows, particularly through contributions to the Jupyter ecosystem via its dedicated open-source program. The firm has submitted over 40 patches to repositories including Jupyter Lab and , improving notebook functionality for interactive computing and analysis. Notable projects include BeakerX, an extension for Jupyter that provides interactive widgets for plotting, tables, and data visualization, enabling richer exploration of complex datasets in . These contributions, hosted on platforms like and supported by events such as Hack Days, promote collaborative innovation in scientific computing while aligning with Two Sigma's data-driven investment philosophy. Through its Academic Partnerships program, Two Sigma funds research in and quantitative finance via fellowships that support doctoral students advancing frontiers, including , , and . Launched to empower diverse academics, the program provides financial backing and mentorship for breakthrough projects, with recipients selected based on research proposals and impact potential. Now in its seventh year as of 2025, it has recognized numerous scholars whose work in areas like for complements Two Sigma's goals, fostering long-term talent development and knowledge exchange with universities and labs.

Controversies and Legal Issues

Regulatory Investigations

In 2023, the U.S. Securities and Exchange Commission (SEC) launched an investigation into Two Sigma Investments LP and Two Sigma Advisers LP for potential violations related to trading model compliance. The probe focused on the firms' handling of known vulnerabilities in their algorithmic investment models, which had been identified as early as March 2019 but remained unaddressed until August 2023. These vulnerabilities, stemming from a lack of written policies and procedures to manage model risks, led to unintended investment decisions that negatively impacted client returns, including failures to supervise an employee making unauthorized changes to over a dozen models. The investigation culminated in a January 16, 2025, settlement with the , where Two Sigma agreed to pay a combined $90 million —$45 million each from Two Sigma Investments and Two Sigma Advisers—for failing to their algorithmic models adequately, in violation of the antifraud provisions of the Investment Advisers Act of 1940. As part of the resolution, the firms neither admitted nor denied the findings but consented to a cease-and-desist order and ; additionally, Two Sigma voluntarily repaid $165 million to affected funds and client accounts during the course of the probe to compensate for losses tied to the model issues. The also found that Two Sigma had breached whistleblower protection rules through certain separation agreements that impeded employee reporting. This settlement was related to failures that later formed the basis for charges against the involved employee. In September 2025, the U.S. Department of Justice (DOJ), alongside the , brought charges against Jian Wu, a former quantitative researcher at Two Sigma who was fired in 2024, for fraudulently manipulating the firm's investment models. Wu allegedly made unauthorized changes to at least 14 models starting in November 2021 to inflate his performance metrics and secure higher bonuses, resulting in trades that impacted approximately $165 million in client assets through altered buying, selling, concentrations, and frequencies of securities. He faces federal indictment in the Southern District of New York on one count each of wire fraud, , and , each carrying a potential maximum sentence of 20 years. The simultaneously filed a civil complaint against Wu for his role in the scheme, which involved deceiving the firm about model behaviors to appear more effective. Wu received approximately $23 million in inflated compensation in 2022 as a result. The Two Sigma cases have prompted heightened regulatory scrutiny on quantitative funds, influencing the to emphasize stricter oversight expectations, including mandatory formal model frameworks, regular vulnerability assessments, and robust internal controls to prevent unauthorized manipulations and ensure compliance in . These developments underscore the growing focus on technology-driven risks in , with enforcement actions signaling that regulators will prioritize preventative measures to protect client interests.

Notable Incidents and Resolutions

In 2014, Two Sigma analyst Kang Gao was charged with unlawfully duplicating and stealing proprietary trading algorithms and source code from the firm, which he emailed to his personal account before resigning to join a competitor. Gao, who had worked at Two Sigma from 2010 to 2014, faced 11 felony counts including computer trespass and unlawful duplication of computer programs. The firm promptly notified authorities upon discovering the breach and fully cooperated with the investigation, leading to Gao's guilty plea in February 2015 without any penalties imposed on Two Sigma itself. Tensions between Two Sigma co-founders and emerged publicly in 2023, when the firm disclosed the discord as a material risk in its regulatory filings, stemming from disagreements over operational strategies and succession planning. This internal conflict, which had reportedly strained the firm's leadership for years, prompted a significant announced in August 2024, with Overdeck and Siegel stepping down as co-chief executive officers while remaining as co-chairs. The transition resolved the leadership rift by appointing Scott Hoffman and Carter Lyons as new co-CEOs, allowing the founders to focus on long-term strategy and innovation. Following these incidents, Two Sigma conducted comprehensive internal audits to identify and address compliance gaps, particularly in and model oversight. The firm also expanded its ethics training programs for employees, emphasizing integrity in and the responsible use of proprietary systems, with mandatory sessions on conflict-of-interest policies. Additionally, Two Sigma issued public statements reaffirming its commitment to transparency and client trust, including detailed disclosures in investor communications about post-incident improvements.

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