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Two Sigma Taps Blackstone Legend Tom Hill to Consult

Hill retired at the end of last year as chairman at Blackstone Group LP’s alternative asset management business.

Two Sigma Taps Blackstone Legend Tom Hill to Consult

(Bloomberg) -- Two Sigma tapped legendary hedge fund investor Tom Hill to consult for the $58 billion firm, according to people familiar with the matter.

Hill, who retired at the end of last year as chairman at Blackstone Group LP’s alternative asset management business, began working with Two Sigma in January, said one of the people. The Wall Street veteran, who built the $78 billion Blackstone unit into the world’s largest investor in hedge funds, is working with senior leaders and teams across Two Sigma’s businesses, including engineering and data, to explore new ventures and commercial opportunities, said the person.

Two Sigma co-founders John Overdeck and David Siegel have a long-standing relationship with Hill, 70. The quantitative hedge fund firm has an investment from BAAM, as the Blackstone unit is known, the people said. The three billionaires also worked together on the board of directors at Hamilton Insurance Group Ltd.

Two Sigma Taps Blackstone Legend Tom Hill to Consult

Hill joined Blackstone in 1993 and served as co-head of its corporate and M&A advisory group before being asked to build out the then-nascent hedge-fund business. Hill built BAAM from about $1 billion of mostly internal capital to the powerhouse it is today, expanding beyond the role of money allocator and into businesses such as seeding and acquiring stakes.

The unit managed to flourish during a bleak decade for the fund-of-hedge fund industry, which has suffered 11 straight years of net withdrawals. Middle men have struggled as they delivered paltry performance while charging an extra layer of fees, prompting clients to bypass them. Assets managed by fund-of-funds have plunged by 22 percent from their $798 billion peak in 2007, according to Hedge Fund Research. BAAM almost tripled in size over that span.

Two Sigma Taps Blackstone Legend Tom Hill to Consult

Investing in hedge funds had been a second career for Hill, who made a name for himself engaging in some of the biggest takeovers of the 1980s and whose work in the battle for RJR Nabisco was chronicled in the best-seller “Barbarians at the Gate.” After co-founding the M&A department at First Boston and running a similar group at Smith Barney, Hill ascended to the top of Lehman Brothers, leading the investment banking practice and ultimately becoming co-CEO.

He stepped back from BAAM’s day-to-day oversight in January 2018, ceding the reins to John McCormick to become the unit’s chairman before retiring from the firm.

Two Sigma, which was founded in 2001 and is known for using complex mathematical algorithms to trade, has over the years expanded into other businesses. In 2009, it started a securities unit, which is a market maker for more than 8,000 listed securities, according to its website. Its venture-capital group, Two Sigma Ventures, has invested in more than 50 companies, and the private-equity arm, Sightway Capital, makes direct investments and allocates capital to outside managers. The company also has an insurance business.

Representatives for Two Sigma and Blackstone declined to comment. Hill didn’t reply to an e-mail seeking comment.

--With assistance from Alexandra Stratton, Hema Parmar and Melissa Karsh.

To contact the reporters on this story: Katia Porzecanski in New York at kporzecansk1@bloomberg.net;Katherine Burton in New York at kburton@bloomberg.net

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Vincent Bielski, Josh Friedman

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