If you want to know what the brave new world of systematic hedge funds deploying artificial intelligence will look like, Two Sigma is a good place to start. The $40bn New York-based firm is a giant in the quant space, employing 1,100 people globally, offering six figure salaries and perks like an in-house recording studio, gaming rooms and, of course, hacker labs.
In the UK, the hipsterish hedge fund run by co-CEOs – and billionaires – John Overdeck and David Siegal is a decidedly smaller operation. It has just 21 employees, according to accounts for 2016 released yesterday on Companies House, but this number has increased by a 50% over the past year.
Revenues at Two Sigma’s London operation went from £6.2m in 2015, to £10.1m last year.
More tellingly, though, the make-up of Two Sigma’s London office is reflective of how more hedge funds are likely to be structured in the future. Eight of its employees work in ‘corporate’ functions, three are modellers and the remaining nine work in software engineering roles. There are no money managers in sight, and it’s the ‘nerdy’ functions that have been growing – from three people in 2015 to nine last year.
Two Sigma’s culture is reportedly more like a tech firm than a hedge fund. As well as the recording studio and ping pong tables, its employees are also referred to as ‘dudes’, it has ‘fiestas’ to mark significant events in the lives of its staff and throws Christmas parties on space shuttles. “Fun and autonomy” are integral to employee satisfaction and productivity, it says.
The firm reportedly pays $500k+ salaries to 20-something maths geniuses, but figures for the UK operation suggest (relatively) modest pay compared to more traditional hedge funds. It put aside £6.4m for employee costs in London last year, or £309.1k ($406k) per head, up slightly from an average of £306.7k in 2015. The highest paid director received £751.6k.
Two Sigma said that headcount growth “should be modest compared to previous years" in 2017.
Despite ongoing hotness of quant strategies, one of Two Sigma’s biggest funds, the Equity Market Neural Risk Premia Strategy, has been struggling this year and is so far flat for 2017, according to reports on Business Insider.
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