Two Sigma founders step down as co-CEOs after years of acrimony

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The founders of Two Sigma, one of the world’s largest hedge funds, are stepping down as co-chief executives of the firm they built into a giant of quant trading after clashing for years over how it should be run.

John Overdeck and David Siegel would step down from their roles at the end of September, Two Sigma said on Wednesday.

The mathematician and computer scientist will be replaced as co-chief executives by the firm’s chief business officer, Carter Lyons, and the former general counsel of investment bank Lazard, Scott Hoffman.

While Overdeck and Siegel are ceding their day-to-day management responsibilities, they will continue to advise on quantitative investment and technology as co-chairs. The pair founded the hedge fund, which today manages $60bn of assets, more than two decades ago after working at DE Shaw.

The infighting between Overdeck and Siegel was exposed last year when the hedge fund made the unusual move of disclosing that disagreements among the management committee members — which includes Overdeck and Siegel — could amount to a “material risk”.

“These disagreements can affect [Two Sigma’s] ability to retain or attract employees (including very senior employees) and could continue to impact the ability of employees to fully implement key research, engineering, or corporate business initiatives,” the filing said.

The committee had been unable to agree on organisational structure, responsibilities for leading executives including chief investment officers, and succession plans.

“Our vision has always been to build a sustainable organisation driven by a systematic investment process, a commitment to investing in our people and platform, and an evolution mindset,” Siegel said on Wednesday.

“With their vast experience, complementary expertise and appreciation for Two Sigma’s unique culture, Carter and Scott will carry this vision forward, guiding the firm to even greater heights,” he added.

Quant trading has become one of the most lucrative strategies among hedge funds, with giants such as Two Sigma attracting investors with cutting-edge technologies and investment methods. Overdeck and Siegel helped to pioneer the strategy.

“We are very grateful for the trust our investors have placed in us over our first 23 years and have full confidence in Carter, Scott and our strong and deep leadership bench as they guide the firm forward,” Overdeck said.