Quant Giant Two Sigma launches a real estate branch

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  • Quantitative giant Two Sigma is launching a real estate investment arm, Two Sigma Real Estate.
  • It has expanded to private investment with private equity, venture capital and ESG funds.
  • The new unit’s CIO will be former WeWork executive Rich Gomel.
  • See more stories on the Insider business page.

Two Sigma’s expansion into private markets added another arm.

Two Sigma Real Estate is the new unit of the $ 58 billion quantitative giant and will be led by Tom Hill, the former Blackstone executive who joined Two Sigma in 2019 as a consultant, and Rich Gomel, a former chief executive of WeWork who ran the company. real estate investment platform.

This is the fourth private investment firm that Two Sigma has created and the second since Hill joined the company.

He told Insider in an interview that he was tasked with determining whether the company’s systematic public market strategy could be applied in the private space.

“Take data, model it, then predict what’s going to happen in the next hour, the next day, the next week,” said Hill, describing in layman’s terms the complex process of the quantum enterprise. “Maybe you can look at some longer term signals that can predict three, four, five years.”

The quantitative manager’s other private businesses, founded by billionaires David Siegel and John Overdeck, include two pre-Hill units – the private equity arm Sightway Capital and a venture capital arm – and Two Sigma Impact, which was launched. Last year. The four private companies together manage $ 3 billion. The company also has a marketing arm.

Real estate investing is a crowded space, of course, dominated by Hill’s former company, Blackstone, but he and Gomel believe the existing data infrastructure at Two Sigma – the tens of data scientists and thousands of datasets – gives the company a “headstart” on long-time gamers.

“It’s hard to do, it’s incredibly expensive to do it,” said Gomel, who joined Two Sigma Real Estate as the chief investment officer, the company’s data science capabilities.

“There aren’t a lot of companies that have the infrastructure – in public or private markets – to do this. It creates a really high barrier to entry.”

The company, which has hundreds of employees with doctorates, has more than 10,000 datasets that Gomel and Hill say can be used to find the best real estate investments.

Drew Conway, who has been senior vice president at Two Sigma since 2019, will be the head of data science for the unit, according to a press release, and there are five dedicated real estate investors on the Gomel team who are planning to hire more. .

“Some people and places are trying to build that, but Two Sigma is already here,” Hill said. He called real estate “ripe for innovation and progress”.

“It’s rich in data but nobody uses it,” he said. “The first-mover advantage is very important.”

Data on migration, employment and regional credit card spending can be indicators of where a city or neighborhood rent is going, for example, Hill said. A project someone worked on recently was to build an algorithm to predict which urban areas would benefit next and when, he said.

At first, the new branch will look at opportunities only in the United States and Canada, but Hill plans to add Europe and Asia if the strategy proves successful.

The real estate arm has not yet raised funds on its own, but has instead invested capital from Two Sigma. Hill, who is the chairman of the four private equity firms, believes it will be a quick fundraiser when the strategies prove successful thanks to the firm’s relationships with many large allocators.

“I’m sure the companies will say, ‘Let’s see if we can’t partner up,'” he said.

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