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Apr 20, 2018

Two Sigma is a fantastic shop. They hire remarkably intelligent and creative people. One of the smartest people I've ever worked with (a summer analyst role) ended up there, and when I heard about it years later, I wasn't surprised at all.

They have grown AUM from $6b in 2011 to over $50b in 2017. That also is not surprising, because they invest heavily in designing quantitative strategies that are as scalable as they are profitable.

TSPI (Two Sigma Private Investments) was a sleeve they set up to accommodate the private-market stuff they found interesting. It was sensible, because while a lot of the investors that comprise the LP universe won't have a problem with a GP they think of as very intelligent choosing to deploy capital based around unique learnings they uncover, most of them have unfortunately rigid models or guidelines around asset allocation.

Let me make that more simple. A $4b university endowment probably follows the classic Yale model: X% to public equities, Y% to private equity, Z% to credit, etc. They write a $50m ticket to Two Sigma in 2012 and are very pleased seeing 16-21% returns across the next three years. Two Sigma starts doing more private market stuff, however, and that endowment CIO knows he can't get a memo recommending an additional allocation of $100m past Investment Committee if the fund is increasingly allocated to illiquid stuff and has changed its docs to no longer allow redemptions on a one-quarter notice.

Two Sigma actually did it the other way around, I believe.

From what I know, TSPI was largely employee assets. The founders, partners, and senior employees all had access to cool stuff (early stage deeptech startups [AI, machine learning, bio, blockchain, quantum computing, etc.], rare real estate, special situations where small checks produce massive returns, emerging markets, and the like) thanks to the surprisingly small world that exists for super smart, super technical people who have half a dozen of the world's more exclusive or insular brand names in academia, government, or the private sector on their resume.

As the stuff in TSPI did really well, it obviously attracted attention from friends and LPs, and managing a business dedicated to private assets requires a very different measure of focus (not harder, just different) than a quantitative fund.

I am not intimately familiar with the workings of the firm, but as I know it, Sightway is nothing other than TSPI getting launched as an SEC-registered manager of private assets. In plain English, they're now making it a separate GP entity that can accommodate LP commitments from interested parties. Now the explanation I gave above of how LPs interact with GPs makes sense. People were interested, now Two Sigma has a way to accommodate that interest.

You can qualify for all different kinds of exemptions when doing fund formation (VCOC, the old CPO exemption that no longer exists, and all the others that your formation counsel will walk you through), but in general once you start to cross $100m and/or attract institutional capital (ERISA assets, etc.), you have to be registered with the SEC.

Sightway is a conduit to accomplish all that: meet regulatory requirements, accept institutional investors, hire domain-specific talent, and build a broader franchise.


Edit (10 minutes later):

Turns out I was correct. Did some very mild digging and found it explicitly mentioned:


Two Sigma began forming a private capital group in 2008 to provide diversifying sources of return for its proprietary capital. In January 2018, Two Sigma separated certain private investment activities and launched Sightway Capital, establishing the firm as an independent management company. Sightway Capital builds on these established private investment capabilities and continues its differentiated investment approach.

    • 4
Apr 20, 2018

Do you know how the recruitment process works at sightway capital ? do they have a structured recruitment process for hiring analysts or associates

Apr 20, 2018

Hi berkshirehath8888, the silence is deafening, sorry about that.... Any of the threads below helpful?

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Who will rescue this thread? @Philip-Aaron @Suede Loafers @StrattonOakmont

If those topics were completely useless, don't blame me, blame my programmers...

Apr 20, 2018