He quietly made billions for Two Sigma. Now, the 'godfather' of a star research unit is starting his own fund.

OsakaWayne Studios/Getty ImagesOne of the top quant researchers in Two Sigma's history is starting his own hedge fund.Hao Zhang pioneered machine learning trading research at Two Sigma, generating billions in profits.Zhang intends to launch Hippocampus Capital Management in early 2026, sources said.One of the most prolific Wall Street investors you've never heard of is preparing to launch a hedge fund.He's never been written about in a mainstream news article, but in certain quant finance circles, Hao Zhang is a revered figure. For 17 years, up until 2024, the quant researcher produced some of the most valuable trading signals at $60 billion hedge-fund giant Two Sigma.A pioneer in applying machine learning to markets at Two Sigma, Zhang is now planning to hang out his own shingle. He's in the early stages of talking to potential investors and hedge fund service providers, according to five people who've been briefed on the plans.Zhang intends to call his firm Hippocampus Capital Management, the sources said, and is targeting a launch date in early 2026, one of the people said. It's not clear how much capital he's looking to raise. Zhang's contract with Two Sigma prohibited him from raising money from investors before July 1, the people said.Industry sources expect the launch to generate significant interest from investors, given Zhang's reputation and track record. His alpha research has been responsible for billions in trading profits for Two Sigma over the course of his career, the people said.Zhang did not respond to requests for comment. Two Sigma declined to comment.The techniques 'godfather'Two Sigma, which has 1,700 employees today, was a comparatively small firm when it hired Zhang in 2007, operating in what was then the secretive hedge fund niche of quant trading.The fund was on the vanguard of machine learning, an early artificial intelligence method that helps computers make decisions and predictions, and recognize patterns. Zhang, with his specializations in both stats and computer science, early on developed lucrative trading models focused on machine-learning non-linear techniques — uncovering complex, non-obvious patterns in market data — people familiar with Zhang said. The group that evolved around such strategies took on different names over the years, but staff shorthand was often simply "techniques."While Two Sigma would pursue other machine-learning initiatives, techniques became the crown jewel and a closely guarded secret. Some refer to Zhang as the "godfather" of the unit, according to former employees.People familiar with Zhang, including two former Two Sigma employees, said the billions of dollars attributed to his trading models make him one of the top researchers in the company's nearly 25-year history.The small footprint Zhang does have online comes from university press stories connected to his donations — which have ramped up in recent years — to the California Institute of Technology and the University of California at Berkeley.Zhang transferred from Fudan University in Shanghai to Caltech in 1997 to study engineering and applied science, later earning a master's in statistics and a Ph.D in computer science at UC Berkeley."That training and education has been a cornerstone in my life," Zhang said in the 2024 announcement of his endowment of a Berkeley professorship.While studying at Berkeley, Zhang lived with another math and stats whiz named Peng Zhao, according to several people who know them. Zhang joined Two Sigma after completing his doctorate; Zhao helped build Citadel Securities, where he was named CEO in 2017.Two Sigma's tumultuous two yearsTwo Sigma has historically maintained a low profile, as is common with quant investment firms.But its last two years have been uncharacteristically tumultuous, highlighted by the long-simmering cold war between founders John Overdeck and David Siegel that burst into public view in 2023. The firm grappled with another scandal that year when a rogue researcher from the techniques unit was accused of unilaterally tampering with trading models, resulting in a Securities and Exchange Commission investigation and $90 million in civil penalties earlier this year (Two Sigma denied wrongdoing).A series of organizational reorgs have also transpired, as well as senior leadership departures and layoffs.Zhang's techniques unit hasn't been immune to the leadership shakeups. Ken Baron stepped down in 2024, and Kan Huang left for Cubist Systematic Strategies last fall. Zhang went on sabbatical last year and departed in late 2024, the people said.He racked up tens of millions in compensation over the years, according to people familiar with the matter, which will come in handy in launching Hippocampus. Quant fund startups are notoriously expensive to get off the ground — costing millions for the necessary data and technology — and can take years to yield returns.Read the original article on Business Insider

Comments

Business News

Financial Times ‘unconvinced’ Odey libel claim is ‘serious’, High Court told

Evening Standard

Stephen Colbert's 'The Late Show' on CBS is getting canceled. Lawmakers want to know if it's because of his political views.

about 10 hours ago

insider

Perplexity's CEO says you should spend less time doom-scrolling and more time using AI

about 10 hours ago

insider

Jerome Powell defends $2.5 billion Federal Reserve renovation project amid criticism from the Trump administration

about 10 hours ago

Comments

Business News

Financial Times ‘unconvinced’ Odey libel claim is ‘serious’, High Court told

Financial Times ‘unconvinced’ Odey libel claim is ‘serious’, High Court told

Veolia takes legal action against Unite

Chevron gets go ahead for $53B Hess deal, access to one of the biggest oil finds

Most US adults think the GOP tax bill will help the wealthy and harm the poor, AP-NORC poll finds

Critical ruling gives Chevron the go-ahead for $53B Hess deal

Trump is leveraging power of his office to reap profits for family businesses

Ex-Raptors exec Masai Ujiri remains focused on humanitarian work as Giants of Africa Festival nears

Most US adults think the new tax law will help the wealthy but few see benefits for the middle class, AP-NORC poll finds

Billy Long will be sworn in as IRS commissioner, taking over an agency he once sought to close

Sun Valley has lost its dealmaking mojo — here’s why

The race to succeed Fed Chair Jerome Powell just got weirder

'An underdog that bites back': Snoop Dogg becomes co-owner and investor of Swansea football club

Burberry ‘encouraged’ by turnaround progress amid job cuts

Burberry ‘encouraged’ by turnaround progress amid job cuts

Veolia takes legal action against Unite

The EU targets Russia's energy revenue and shadow fleet with new sanctions over Ukraine war

Uvalde school shooter was fueled by Instagram and 'Call of Duty,' L.A. lawsuit alleges

January fire victims face little used mediation in faceoff with insurers

Where the wealthy are moving now

The Trump camp’s tug of war over Fed Chair Jerome Powell’s future

Single? Expert tips on how to save money when you’re flying solo

Haven and Warner Hotels-owner plots break-up and sale

8 money-saving tips for single people

The one-second habit that could save you £60 on your power bill

Trading 212 Cash ISA: Earn 4.98% tax-free interest today

Burberry ‘encouraged’ by turnaround progress amid job cuts

Reckitt strikes deal worth up to £3.6bn to sell Cillit Bang business

BP sells onshore wind farm business in US

Reckitt strikes deal worth up to £3.6bn to sell Cillit Bang business

Burberry ‘encouraged’ by turnaround progress amid job cuts

BP sells onshore wind farm business in US

Business news live: Jaguar Land Rover to cut jobs, Marks & Spencer give staff extra discount

Post Office Capture IT system conviction referred to Court of Appeal for first time

Serious water pollution incidents up 60% last year, watchdog reveals

Get a Legoland Resort visit for 3 people this school holiday for £50 less if you're fast

Shoppers will be blocked from using buy now, pay later under new crackdown

Reckitt sells Cillit Bang and Airwick to private equity in $4.8bn deal

Would you go off-grid? This woodland cabin is on sale for £165,000

FTSE 100 Live 18 July: Reckitt Benckiser sells Cillit Bang division, Burberry posts update

Trump’s tariff pressure pushes Asia toward American LNG, but at the cost of climate goals

Asian shares mostly advance after Wall Street cruises to more records

Trump offers regulatory relief for coal, iron ore and chemical industries

Federal Reserve's Waller says central bank should cut rates at next meeting

After years of tough rules on liquids and footwear, US air travel may be on the cusp of a new era

Federal Reserve says building renovation complies with law, defends costs

Major building society launches quirky new Isa with a 4.12% rate

How much battery range has this electric Volkswagen lost after clocking 107,000 miles in four years?

Pinky ring demand is soaring, says jewellery expert DAN HATFIELD - do you have one tucked away worth a small fortune?

Lloyds slashes charge on ready-made investment fund to lure in customers: Is it a good deal?

Warning over double inheritance tax trap if you move to Spain - experts reveal what you need to know...

Xi Jinping is questioning if all of China should chase the same AI and EV dreams

Katherine Schwarzenegger says she hired a coach to teach her how to step-parent Chris Pratt's son

Stonepeak Invests $1.3 Billion In Warburg Pincus-Backed Data Center Operator Princeton Digital

Turki Alalshikh Cuts Ties With 2 Fighters For Being Disrespectful

Trump Directs Bondi To Release Some Epstein Case Documents As He Threatens To Sue WSJ And Murdoch

LEGO's back to school range includes £15 desk drawer and brick lunch bags

Stephen Colbert's 'The Late Show' on CBS is getting canceled. Lawmakers want to know if it's because of his political views.

Perplexity's CEO says you should spend less time doom-scrolling and more time using AI

Jerome Powell defends $2.5 billion Federal Reserve renovation project amid criticism from the Trump administration