Inside Two Sigma’s Billion-Dollar Private-Markets Gambit

当软件工程师Patrick Leung去年5月加入了两个Sigma时，该公司正在向最重要的是，除了系统的对冲基金之外，这是最具侵略性的游戏，这些资金将华尔街的Darling Dare商店转变为600亿美元的强国。

For the first time, Leung knew, Two Sigma was opening up its internal private-equity portfolio to outside capital. The new vehicle was called Sightway Capital, and Leung, a former engineering lead at Google, had been tapped to oversee technology and data science efforts at Sightway and its VC counterpart, Two Sigma Ventures.

“Private markets — specifically, private equity — were at a very nascent stage in terms of their adoption of data science,” he explains. The allure for Leung was decidedly simple: to be on the leading edge of applying data science techniques to these private markets, a vast playground largely untouched by the quant methods that have come to dominate the public markets.

五个月后，观音道已关闭其第一个基金，从投资者中筹集了12亿美元 - 包括马萨诸塞州760亿美元的养老基金 - 在两个西格玛的申请中，它可以利用其在这个新舞台中的铁杆技能。

怀疑论者可能怀疑两个西格玛的定量能力实际上可以从对冲基金世界转化为私募股权 - 一般伙伴传统上依靠个人网络和基本分析来源和评估交易的资产课程。就像它一样，私募股权是一个拥挤的领域 - 一个未成币资本正在堆积的地方，交易竞争是激烈的，总公司在兴趣前的价格超过10倍以上的公司交易以上交易的公司遭受压力，税收，折旧和摊销。

As Leung and other insiders knew, however, Two Sigma is no private-equity novice. The hedge fund firm has long invested in private markets using its partners’ capital — and as PitchBook’s Wylie Fernyhough points out, Sightway “wouldn’t have attracted $1.2 billion if it didn’t have a good track record.”

Still, the private-equity analyst doesn’t see how there could be much overlap between the Sightway strategy and Two Sigma’s systematic hedge funds. In general, “quantitative investing is really about high-frequency trading — and that kind of data doesn’t really transition to long-term private-equity investing,” Fernyhough says. “I wouldn’t expect to see many quant funds make the jump to private equity.”

But Two Sigma has made the leap. Can Sightway stick the landing?

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两个西格玛喜欢to promote itself not as a hedge fund firm, but as a leading technology company. And according to the official line from Two Sigma — a firm long in control of its own narrative, and one that hews closely to talking points — Sightway presents just another opportunity to leverage its technological expertise.

“Two Sigma’s mission and vision has been to find opportunities to find value in the world’s data,” says chief investment officer Wray Thorn. “Private investments [are] an area where we’re endeavoring to build businesses that can employ that same mission. From our standpoint, I think it’s consistent with our mission as a company.”

根据荆棘，观光路的战略是识别“资产密集型”行业，在其中建立投资组合公司从头开始，招聘手中的执行团队，使用数据科学发展每个企业。

“The market environment is competitive,” he says. “This is an area that is less competitive. There are not very many firms that focus on this type of investing or focus on these verticals. When you overlay that with data science to help companies succeed, we like to think that differentiation is quite significant.”

两只西格玛在想要扩大其私人市场的存在时远离独自一人 - 以及充分理由。在过去的几年里，虽然许多对冲基金遭受救赎，但私募股权已被现金淹死。投资者渴望致力于致力于私募股权基金 - 并且愿意为自己的特权支付高度费用。反过来，对冲基金正在寻求满足投资者需求，大约四分之一的对冲基金经理去年，去年报告其公司提供私募股权产品。

随着观光赛的开始可能表明，两名西格玛符合若干标准，即专家对资产管理公司闯入私营市场是必要的。对于一个，它有助于在投资界内拥有强大的品牌，根据德勤凯西古典练习的校长凯文Quirk凯文Quirk的说法。两个西格玛有这一优势，另一家对冲基金公司目前正在推动私募股权：Elliott Management Corp.是去年保罗歌手领导的Activist公司raised据收购交易为20亿美元The Wall Street Journal。

Other requirements for expansion, according to Quirk, include strong leaders who can navigate the transition, sufficient scale to support the new business, and a rationale for the move that’s not based purely on the amount of money pouring into the asset class.

“In order to position themselves for success, firms need to have a good story for why they’re expanding,” says Jack Tamposi, a senior analyst at Cerulli Associates. “If they’re just expanding into a space for the sake of raising assets, that is not going to resonate as well with a long-term investor like an endowment or foundation.”

It helps that Two Sigma is not new to private markets. As Thorn explains it, Sightway the brand may have only existed for two years — but Two Sigma began developing its private-equity business as far back as 2008. Thorn himself joined the quantitative investment firm in 2012, when he was brought in to build out a team and portfolio of privately held companies. The launch of Sightway in 2018 coincided with the decision to tap outside institutional investors for the additional capital needed to “grow our companies in greater size and scale,” Thorn explains.

提高资金以支持现有公司组合的独特地位。一方面，他们有一个投资者描述为“概念证明”和“成功的数年”投资。另一方面，除了传播路线的整体投资策略外，还必须在基金的现有投资组合公司上销售投资者。

This dynamic is seen in the investment made by the Massachusetts Pension Reserves Investment Management Board, which committed up to $500 million to Sightway in early 2019, according to plan documents. However, not all of the Sightway-backed companies were seen as a good fit for MassPRIM’s mandate — so the investment was made through a separate account that has exposure to some, but not all, of the comingled fund’s portfolio, according to a person familiar with the matter.

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另一个挑战该观景道 - 以及每个其他汤姆，鸡巴和哈利试图模仿两只西格玛的Gambit - 面孔是私人市场中可用的相对缺乏数据，在那里公司不需要报告财务数据和其他信息。

“Private markets have different challenges than public markets because there’s a lot less readily available financial and operational information out there,” says Leung. “It’s a lot more difficult to create these more quantitative models that you have in the hedge fund world.”

It was this challenge that lured Leung to Two Sigma from Google, where he had worked as an engineer on projects including, most recently, developing an artificial-intelligence-based conversational system called Google Duplex.

In his new role as chief technology officer for Two Sigma Private Investments, Leung works with both Sightway and Two Sigma Ventures, a venture capital unit founded in 2012. Like the private-equity division, Two Sigma Ventures is also expanding its reach, having just closed its first fund raised primarily from external investors. The $288 million venture capital fund, closed in January, will invest primarily in data-driven startups.

Two Sigma is not the only firm trying to bring quantitative investing to the private markets.CircleUp, founded in 2012 by TSG Consumer Partners alum Ryan Caldbeck称为日光反射信号器,使用机器学习平台help it source potential deals in the consumer retail sector. Other private-equity firms, particularly the “larger players,” have similarly been eying ways to incorporate data analysis into their portfolios, according to PitchBook’s Fernyhough.

“数据已经表现出可以成为竞争优势的东西，”他说。“数据是其中最有价值的资产之一，私募股权公司正在寻找任何可能利用它的方式。”

Still, Leung claims that Sightway has a “huge advantage” as part of Two Sigma. “The company has developed a sizable team dedicated to data discovery, and there are data sets [Two Sigma] is already using for public markets,” he says. “We are tapping into that huge existing pool of data to give us a head start in terms of applying data science, and we are taking full advantage of Two Sigma’s well-developed capability to discover and license new data.”

Sightway can, for instance, access Two Sigma data sets that include private companies to quantify employment information and other factors that can help the team determine which investment opportunities to prioritize. But perhaps the most meaningful implementation of data science comes later,后portfolio companies have been established.

例如,医学与Dext资本nt leasing company that launched in October 2018 with Sightway’s backing. In founding Dext, Sightway’s goal was to build a company that could use data science to more effectively evaluate potential loans.

“在这种情况下，我们没有考虑一下执行官，所以我们设定了寻找一位高管，会议我们每个人都可以满足我们可以与建造公司合作的人，”刺解释道。“我们很幸运能够找到一个CEO Kyin Lok，他们对应用数据科学和数据驱动的决策在承销和整个业务流程中进行了相当的亲和力。”

With Lok on board, the Sightway team got to work identifying data sets that could give Dext better insights into a company’s creditworthiness and allow the lender to more accurately predict default.

“Dext is a good illustration of Sightway’s strategy,” Leung says. “Introducing data science can be a change for the company’s culture — as well as the way it does business. We’re getting in there early with a management team versus trying to turn around a company that’s been doing business a certain way for decades. The earlier you get in there, the less kind of inertia and resistance you’re going to run into.”

Or, as Thorn puts it, getting in early allows Sightway to build its own technology platform, as opposed to “inheriting someone [else’s].”

“Sightway’s primary strategy is to build,” he says. “Buying companies is quite competitive — and it’s quite expensive. We’re focused on creating new companies with teams of executives that we think are strong, and growing those companies by originating and growing assets.”

观光路上的投资者对球队识别“良好的管理团队”跨越“一个漂亮的不同行业的良好管理团队”的能力方面发表积极地谈到。无论如何技术驱动的观光路和其投资组合公司都可能是“您在一天结束时押注管理团队”，投资者争辩。“You still have to have that level of trust with the people you’re working with and believe they have the right management skills,” because however “hands on” Two Sigma is, “they’re not trying to manage these businesses within the four walls of Sightway.”

无论这是正确的举动当然需要多年来辨别 - 与量子经理的几乎瞬间反馈不同。最终可能是关于两个西格玛的私募股权最难的事情，那些公司一定会遵循它。