Key Takeaways
- • Two Sigma Investments told clients that a senior vice president and researcher, Jian Wu, made unauthorized adjustments to the hedge fund's investing models, producing a total of $620 million in unexpected gains and losses over the past year.
- • Wu, who according to the firm was trying to boost his own compensation, has been placed on administrative leave; the firm did not name him in its client communications, per the Wall Street Journal's reporting.
- • The episode has led to losses in some funds, large gains in others, and fresh regulatory scrutiny of the New York-based manager.
- • Reuters, citing the WSJ, reported that Two Sigma is in settlement talks with the U.S. Securities and Exchange Commission over the matter, with a possible payment of as much as $100 million.
Summary
Two Sigma Investments, the New York-based quantitative hedge fund, has told clients that a researcher adjusted the firm's investing models without authorization, the Wall Street Journal reported. According to people close to the matter and investor letters, the changes were made over the past year and generated a total of $620 million in unexpected gains and losses across the firm's funds, with some strategies losing money while others benefited.
The researcher, Jian Wu, is a senior vice president at Two Sigma. The firm told clients that Wu was attempting to boost his compensation through the changes. Two Sigma did not identify Wu by name in its client communications, but the WSJ reported his identity, and the firm has placed him on administrative leave.
The matter has also drawn regulatory attention. Per reporting from the WSJ and Reuters, Two Sigma is in settlement talks with the U.S. Securities and Exchange Commission and is likely to pay as much as $100 million to resolve the agency's probe into the trading activity. Two Sigma, which the WSJ notes manages more than $60 billion in assets, is expected to face continued scrutiny from clients and regulators as the investigation proceeds.
The researcher, Jian Wu, is a senior vice president at Two Sigma. The firm told clients that Wu was attempting to boost his compensation through the changes. Two Sigma did not identify Wu by name in its client communications, but the WSJ reported his identity, and the firm has placed him on administrative leave.
The matter has also drawn regulatory attention. Per reporting from the WSJ and Reuters, Two Sigma is in settlement talks with the U.S. Securities and Exchange Commission and is likely to pay as much as $100 million to resolve the agency's probe into the trading activity. Two Sigma, which the WSJ notes manages more than $60 billion in assets, is expected to face continued scrutiny from clients and regulators as the investigation proceeds.
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