Hedge fund CEO with CFA Charter displaced by mathematician

Two Sigma, the pioneering quant fund, certainly seems to believe that good things come in pairs. It’s got two main business units (Two Sigma Advisers and Two Sigma Investments).  It had two genius founders (David Siegel and John Overdeck).  The very name is a double meaning (the Greek letter “sigma” can either stand for volatility or for a sum). 

And when the two founders fell out so badly that they were having two separate town hall meetings for their two sets of employees (“modellers” managed by Overdeck and “engineers” managed by Siegel), those founders eventually decided to step back and hand over command to two co-CEOs.  The company has never publicly said what its favourite Motown song was, but Marvin Gaye and Kim Weston’s hit “It Takes Two” would be a solid bet.

But now it appears that the symmetry has been broken.  Overdeck is unexpectedly back on deck, joining the management committee.  And Carter Lyons, the co-CEO on the left of this picture, will be … leaving the management committee, but remaining as a co-CEO.  You might have to be a genius of some sort to understand how that works. Lyons will retain joint responsibility for “day to day operations”, along with Scott Hoffman, his fellow co-CEO. Hoffman will presumably fill him on what happened at the management committee.

Of course, the title “CEO” hits a little bit differently in the hedge fund world compared to almost anywhere else (except maybe professional sport), because managing the actual fund is a lot more important than managing the business.  The really important pair of employees at Two Sigma are the two (of course) Chief Investment Officers, Geoff Duncombe at Advisers and Ali-Milan Nekmouche of Investors. 

Why is Overdeck back? It might have something to do with his very expensive divorce. Alternatively, it might be because Nekmouche is going to be taking some time out for family reasons later this year.  Managing quants is difficult if you’re not a quant yourself. Lyons is a full CFA[tm] Charterholder with experience in investor relations, but Overdeck is a Stanford mathematician. He appears to have shunted Lyons aside and can seemingly be a difficult if witty presence – he’s reported to have intentionally irritated Siegel on occasions that led to their falling out. 

Overdeck’s return means Siegel is likely to stay away forever. That’s fine: CTO Jeff Wecker is managing his engineers and Siegel might not have been particularly keen on getting involved in management at this precise moment. Two Sigma’s staff cuts made late last year were concentrated on engineers, modellers and traders rather than portfolio managers.  This was seemingly in order to course correct for a somewhat easy-going culture in which underperformers were perceived to have been given an easy ride.

The strange thing is that all of this drama – and it would be a brave forecast to say that the soap opera is definitively over – doesn’t seem to have affected performance at all; Two Sigma has continued to be one of the best performing funds through it all.  That must be the big advantage of doing your investment by machine.

Elsewhere, as far as we are aware, this is the most massive air to have so far been grabbed by a kitesurfer of Managing Director rank or equivalent.  Brian Sack, a former Fed economist who worked for DE Shaw for a decade, moved to be Head of Macro Strategy at Balyasny last year, based out of their Boston office. 

It seems that Sack is taking full advantage of the work-from-home regime; this clip was filmed on Monday, when according to the local news, Sack was on a lunch break and noticed that the wind and surf were too good to miss.  Multistrategy hedge funds are famous for their tough risk management policies, so it’s probably good to see the portfolio managers getting their adrenalin in other ways. 

Meanwhile …

The latest Jefferies Leadership Letter finds Rich Handler and Brian Friedman in an “it could be worse” state of mind, urging staff to be kind to one another in tough market conditions, while reminding them that as bear markets go, they’ve seen much worse. Interestingly, the letter refers at several points to the management team’s “long term” view, which might be considered encouraging to recently hired MDs who haven’t been able to put many wins on the board yet. (Jefferies)

“Due to a workspace shortage at your location, you will not participate in a seat selection process to have an assigned workspace”.  The bank supervisors responsible for JPMorgan, Morgan Stanley, Citigroup and HSBC will be racing for a desk in a first-come-first-served battle royal, as the OCC has ordered employees back to work but doesn’t have enough space for them. (Bloomberg)

Former UBS CEO Ralph Hamers is an investor in and advisor to Arta, a fintech startup that is attempting to sell wealth management service to Generation Z with a chatbot that says things like “no cap, ur portfolio is fire!” and “Low-key gonna break down ur investment plan rn”. (WSJ)

Current UBS CEO Sergio Ermotti was awarded just under $17m last year, making him (no cap) the best-paid CEO in European banking.  Andrea Orcel (low key) got $14.3m, 32% up on the previous year. (Bloomberg)

Equity research isn’t all a glamour job; analysts at RBC have been doing channel checks on pizza stores, in order to inform investors that “we believe stuffed crust is performing largely in-line with employee expectations”.  It is “too soon to tell the impact to the model”, so that will be another set of phone calls. (X.com)

Unicredit is using an AI platform to try to comb through its list of small and mid-market clients to suggest M&A opportunities which would be too costly to execute manually. Apparently there is €50-60bn of business to be done each year in deals below €50m in individual size. (Financial News)

Barclays has hired Jason Short to cover West Coast financial sponsors – he has worked for them before, but joined Deutsche Bank in 2019 which is a bit too long to call it a “boomerang hire”. (Bloomberg)

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