Two Sigma Investments LP is a hedge fund manager based in New York City. It manages 17 hedge funds and has more than $66.14 billion in assets under management. There are 604 advisors at Two Sigma. There are no other types of funds at Two Sigma.
Two Sigma is well known in some circles, though not for its hedge funds but for its artificial intelligence program called Halite. This was a challenge for coders, allowing them to build smart bots to try to take control of a virtual grid. There was a second version, Halite II, where players used ships to compete for control of planets.
Two Sigma Investments Background
Two Sigma was founded in 2002 and has been registered with the SEC since 2009. It was founded by John Overdeck and David Siegel. Mark Pickard is a co-founder. Trusts established by Overdeck and Siegel are the principal owners of the firm.
The only clients of the firm are the 17 hedge funds it manages. There are no other institutional clients and no high-net-worth investors on the rolls.
Two Sigma Investments Investment Philosophy
A variety of strategies and methods are used at Two Sigma to build the investment portfolios for the hedge funds the firm manages. The strategies include:
- Statistically based strategies
- Merger arbitrage
- Risk arbitrage
- Closed-end funds
- Fundamentally driven strategies
- Event-driven strategies
- Long/short strategies
- Volatility arbitrage and trading strategies
- Structured credit trading strategies
Quantitative mathematical models are generally used to implement these strategies.
Largest Hedge Funds Managed by Two Sigma Investments
Two Sigma Spectrum Portfolio
AUM: $13,367,145,003
Minimum: None
Beneficial Owners: 462
Two Sigma Equity Portfolio
AUM: $11,985,699,582
Minimum: None
Beneficial Owners: 283
Two Sigma Strategies Fund
AUM: $9,338,298,442
Minimum: $1 million
Beneficial Owners: 121
Two Sigma Equity Spectrum Portfolio
AUM: $8,738,009,889
Minimum: None
Beneficial Owners: 486
Two Sigma Equity Fund
AUM: $8,150,103,779
Minimum: None
Beneficial Owners: 401
Fees at Two Sigma Investments
Most clients at Two Sigma pay an asset-based fee of between 2% and 4%. The fees may vary and be negotiable, though.
There are also performance-based fees for funds at the firm, generally between 20% and 30% of the net profits a fund earns in a year.
What to Watch Out For
As noted above, hedge funds are complicated instruments that are loosely regulated. You have to be an accredited investor before you can invest in a hedge fund.
There is also one disclosure on the record at Two Sigma. It was filed in 2016 and relates to an affiliate breaking a rule of the Chicago Board of Trade. Specifically, certain clients and TSI clients held aggregated wheat futures positions in excess of the CBOT standard all-month limit. Upon discovery, the overage was liquidated to bring the aggregate position into compliance with the CBOT limits. As part of the settlement, TSI agreed to pay a fine of $25,000, while neither admitting nor denying any rule violation.
Becoming a Client of Two Sigma Investments
The best way to talk to someone at Two Sigma about potentially investing in their funds is to contact the office nearest you from the list here.
Investing Tips
- If you're considering investing in hedge funds, think about working with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Don't forget to think about protecting your investments after you die; make an estate plan, even if you think you'll be around for a long time.
