Two Sigma posts solid returns in a year headlined by internal drama at the $60 billion hedge fund

• Two Sigma had a chaotic year in 2023, with internal drama spilling into public view.
• The quant investing giant nonetheless posted solid returns in two of its core strategies. 
• Its Absolute Return Enhanced fund returned 12% and its Spectrum fund was up 8.6%

For Two Sigma, 2023 may be remembered as the year the secretive quant giant’s internal drama — including a long-simmering feud between its founders — gushed into public view. 

Despite the chaos, returns at the more than $60 billion in assets firm were solid in two core strategies, according to a person familiar with the results.  

The Two Sigma Absolute Return Enhanced fund was down slightly in December but gained 12% for the year, the person said. The fund, which invests in multiple strategies but historically has leaned into systematic equity market neutral trading, had an annualized return of about 10% through late 2022, according to investor documents. 

Its equity quant fund Spectrum was up slightly in December and ended the year with an 8.6% return. 

A representative for the firm declined to comment.

The returns are in line with 2023 performance at other hedge fund giants like Citadel, Millennium, and D.E. Shaw.

Two Sigma’s solid results come in spite of severe dysfunction between its top executives, cofounders John Overdeck and David Siegel. The pair have been at odds for years, but the discord reached a point this spring that the company disclosed in a securities filing that the relationship was threatening the company’s business prospects. 

This fall, the firm disclosed that the actions of a rogue trader caused $170 million in client losses, on top of gains to other clients. That trader has since fired back at the firm and threatened a defamation lawsuit, saying in a December court filing that he had no control over the implementation of the trading models in question.