• Two Sigma's billionaire cofounders, John Overdeck and David Siegel, are heading to arbitration.
• The pair stepped down from the $60 billion quant in August.
• Despite the cofounder drama, the firm's flagship returned 10.9% in 2024.

Two Sigma's billionaire founders are not done fighting, but luckily for investors, they're no longer at risk of being collateral damage.

The cofounders, John Overdeck and David Siegel, are heading to arbitration over their long-standing feud about how to manage the $60 billion asset manager that they started in 2001.

According to a Bloomberg report, the firm disclosed the arbitration in a letter to investors on Wednesday and said that it isn't party to the dispute. The firm did not respond to a request for comment.

Many hedge funds stumble when it comes to succession planning. For example, Bridgewater Associates went through several top executives over a decade before Ray Dalio finally let go of the reins. Investors in managers with aging founders push their funds to come up with succession plans, with varying degrees of success.

In the case of Two Sigma, the LPs are likely breathing a sigh of relief that the dispute between the two billionaires didn't complicate succession plans or stop the firm from humming along.

Two Sigma's investors enjoyed solid returns through 2024, as its flagship Spectrum fund gained 10.9%. The manager also made 14.3% in its Absolute Return Enhanced strategy, a person close to the New York-based quant giant told Business Insider.

The firm announced in August that Overdeck and Siegel would step down from their roles atop the firm to become the manager's co-chairmen. Carter Lyons, formerly the firm's chief business officer, and Scott Hoffman, former Lazard general counsel, took over as co-CEOs in September.

Siegel's and Overdeck's visions for Two Sigma decoupled in recent years to the point that the firm had to make a disclosure in a filing saying that its management committee "has been unable to reach agreement on a number of topics" — including succession.

While a leadership change affects every fund, quant platforms have proven themselves to be more capable of adapting. D.E. Shaw and Renaissance Technologies, two of Two Sigma's biggest competitors, have turned over their C-suite and continued to produce strong results.

The cofounders' decision to leave their day-to-day at the firm left LPs feeling optimistic.

"It's what we wanted to see," one Two Sigma investor told BI in August.