Two Sigma’s new leaders have made their mark with hundreds of job cuts. Here’s what could come next for the $60 billion firm.

Two Sigma cofounders David Siegel and John Overdeck stepped back as co-CEOs of the firm in September.

Two Sigma

Two Sigma laid off 200 employees Thursday, 10% of the $60 billion firm’s workforce.The hedge fund is run by co-CEOs Carter Lyons and Scott Hoffman, who took over for Two Sigma’s billionaire cofounders in September.The firm is planning to continue to invest in its core strategies, a person close to the manager said.

Thursday brought the latest twist in a year full of them for $60 billion Two Sigma.

The New York-based quant giant has cut 200 jobs — roughly 10% of its overall workforce. The layoffs come less than three months after co-CEOs Carter Lyons and Scott Hoffman took the helm for billionaire cofounders John Overdeck and David Siegel.

No portfolio managers were eliminated, a person close to the manager told Business Insider. Bloomberg earlier reported the cuts.

Two Sigma, which produced decent returns in its two largest quant funds through the first half of the year, is still planning to grow areas it found to be the most impactful following the firm’s strategic review, the person close to the manager said. Those areas include quant and discretionary strategies, machine learning, and the manager’s tech platform.

The leadership change offered the firm an opportunity to do a broader review of its different units, the person said. The manager has expanded in recent years, including a real-estate strategy in 2021 and risk management and portfolio analytics platform Venn in 2019. The firm also started hiring investors to focus on discretionary strategies for the first time last year.

The goal is to be more disciplined as the firm grows going forward, the person close to Two Sigma said. They noted that the employee retention rate is 95%, so any meaningful changes at the firm would have to be done through job cuts.

The firm is just starting on the journey that very few hedge funds ever begin: life without its founders.

Two Sigma’s investors though were ready for a change. The firm’s cofounders had been feuding for years, dividing the manager internally.

Lyons, the former chief business officer, was lauded for his work in expanding Two Sigma’s product offerings in the August announcement of his promotion. Meanwhile, Hoffman, Lazard’s former general counsel, was picked in part for his experience “navigating complex governance changes,” the announcement noted.

The announcement also pointed to Hoffman’s key role in shepherding Lazard’s IPO to completion in 2005. It said he was a key player in the process, advising the boutique investment bank’s leadership and board.

One industry insider noted that his hiring might pave the way for a potential listing from Two Sigma one day; the manager’s diversified offerings and tech platform make it more well-rounded than the average hedge fund, and a liquidity event could at least partially detangle the bickering cofounders’ fortunes.

In this light, the latest cuts could be seen as a clean-up of balance sheet bloat — but the person close to the firm said that a listing has not been discussed in any form.