Two Sigma, the $65 billion hedge fund known for its quantitative investing, was in the news more than usual last year because of its feuding founders. But while attention was on the rift between the co-CEOs and layoffs ordered by the top brass who replaced them, a bright spot went unnoticed publicly.
Venn, Two Sigma’s portfolio analytics software, continued to add users, including family offices.
The hedge fund created Venn in 2017 to share some of its in-house risk analysis tools with a select group of its limited partners, mostly sovereign wealth funds, endowments, and foundations, but also plenty of single-family offices — “large ones, big names,” Brett Romanoff, a senior vice president and the head of revenue for Venn, told Modus. Two years later, Venn was made widely available to all institutional investors, wealth managers, and consultants (and, somewhat officially, a competitor to BlackRock’s Aladdin). It offered them a free version of the software or a professional one that reportedly cost $50,000 a year.
In 2022, Venn eliminated the free tier. Now, all users pay a fee to use the platform and are charged additional fees based on the number of people who need access, the currencies they work in and whether they use the platform’s reporting, Private Asset Lab, and APIs. Two Sigma declined to share Venn's current base cost. Assuming any version of Venn is still $50,000 per year, that would be a considerable expense for typically cost-conscious family offices.
Nonetheless, the company said the number of family offices using Venn has approximately tripled since 2022. It declined to share more details, so it is unclear how many offices it currently counts as customers. According to Venn’s website, it works with more than 200 clients who collectively have over $20 trillion in assets.
Venn has benefited from a few tailwinds.
Sixty percent of family offices have a CIO-led investment team, and the offices with at least $500 million in assets are more likely to have a CIO, according to Citi Private Bank’s 2024 family office survey. As the number of family offices grows and they become wealthier, the pool of CIOs hired to manage their portfolios more professionally is also expanding.
“We noticed a trend, an obvious one. Talent was moving from institutions into the family office space, and they were bringing with them institutional frameworks and approaches to investing, a factor-based approach, raising expectations for the conversation they were having around a multi-asset class portfolio and macro implications,” said Romanoff, who joined Two Sigma in 2018. “And this cascaded. All of a sudden, we were talking to more and more single-family offices, then more multifamily offices. And the multifamily office portfolios started to look more like the single-family office [portfolios].”
Shifting interest rates, geopolitical conflicts and, more recently, tariffs have broad impacts on markets, economies and portfolios. This has also nudged CIOs and investment team members to seek software like Venn as they evaluate their allocations, risk, and asset managers differently.
Family offices like to talk to each other about which companies they are cherry-picking to invest in directly. It makes for better conversation. The fine-tuning of allocations and thoughtful rebalancing aren’t as stimulating, although those things often make the most significant difference.
“Actual asset allocation is probably going to be the main driver of your return, not if you picked manager A or manager B. It's going to be ‘Were you in equities or were you in bonds?” Christopher Carrano, vice president of strategic research at Venn, said.
Venn uses 18 factors — unique sources of risk and return that are common across asset classes — for its analysis, which is helpful when evaluating a multi-asset class portfolio. The quantitative breakdown is focused on returns and correlations, so it can, for example, be effective without knowing the specific holdings of a hedge fund in which a user is invested. It also helps users do things like determine if a private equity fund is truly beating an equity index fund on an apples-to-apples basis, Carrano said. (Spoiler: Some PE firms are, but investors aren’t as diversified as they might think.)
As family offices professionalize their investment management, the performance bar has also risen. They need to show that their decisions are having a positive impact on the portfolio. “If you're spending money to bring people in who are supposedly really good at this stuff, you want to make sure you can hold them accountable. You want to make sure they can also explain to you why they've made decisions. It's kind of less personal and more factual ways,” Romanoff said.
Venn got another boost last year when the Chartered Alternative Investment Analyst Association, or CAIA, unveiled its report, “Innovation Unleashed – The Rise of Total Portfolio Approach.” While TPA might not be right for everyone, and most investors have stuck with strategic asset allocation, Romanoff said it was a point of validation that gave investment teams permission to embrace it.
“I think total portfolio analysis is what we do best. We've evolved our business with that trend,” Carrano said. “But I do think that's something to keep in mind. What does total portfolio actually mean today? What is it going to mean tomorrow, and what is it going to mean 10 years from now? Total portfolio analytics have to evolve alongside that.”
According to a 2024 report by Deloitte, nearly one in five family offices say inadequate investment in technology is a core family office risk, and nearly three-quarters admit they are either underinvested or only moderately invested in the operational technology needed to run a modern business. The same report said that 43% of family offices are developing or rolling out a new technology strategy this year.
Venn is witnessing that. Carrano says family offices aren’t always weighing Venn's cost and benefits against similar software. Some are totally rethinking what they considered components of their investment process and management now that they are hiring CIOs and have better tools available to them.
“We've had wins that have literally been the replacement of an OCIO,” he said.
Asora Solves Reporting Headaches
Automated data aggregation and simplified performance monitoring give family offices a single source of truth, so you spend less time on reporting and more time making informed decisions.
SEE HOW IT WORKSOther News
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- Frazer Rice, the director of family office services at Next Capital Management and producer of the “Wealth Actually” podcast, interviewed former IRS Commissioner Chuck Rettig about what it's like to be a top tax collector — one of the “most hated” people, who routinely receive death threats, Rettig said about the job. “For a federal government salary, you really have to want to make a difference.”
- Bruce Zimmerman, the former CIO of Ray Dalio’s family office, is now an investment director at Tresalia Capital, the family office of Maria Asuncion Aramburuzabala and her relatives. Aramburuzabala inherited a stake in Corona beermaker Grupo Modelo from her father, which AB InBev acquired over a decade ago for about $20 billion.
- Alp Ercil is closing his $3 billion hedge fund after 14 money-making years and converting it into a family office.
- Citi Private Bank hired Hoo Peng Han to be the director of its global family office group in Asia. Singapore alone added 350 family offices in 2024, bringing the total to 2,000, according to the deputy chairman of the city state's central bank, Chee Hong Tat.
- A Private Club’s Very Public Problems. (If you’re a member of Soho House, you already know the problems and need not click.)
- What’s Next for MrBeast? Class Consciousness.
- Should we really be sending more people to space, let alone traveling to and inhabiting another planet? “Can the Human Body Endure a Voyage to Mars?” is exactly the well-reported and crafted New Yorker story you’d expect it to be. And if you can’t get enough of space-health science writing, I highly recommend a book by Mary Roach — one of my favorite authors — called “Packing for Mars.”
Jobs
- A single-family office founded in 1941 that serves four generations and more than 200 households is looking for a new CEO and president to join it in either St. Paul, Minnesota, or Tacoma, Washington. The new chief executive will oversee a complex structure of entities, including a private family-owned mutual fund company, a family holding company, a private trust company and a family foundation.
- Charles Hoskinson, a co-founder of the blockchain infrastructure research and engineering company IOHK, is seeking a personal knowledge management and AI specialist to join his family office. If you are a computer whiz, have already worked for another family office, and are in Boulder, Colorado (or would move there), this one could be for you. Salary is $175,000 per year, plus other comp and benefits.
- The office of a family with an “extensive history” of investing in real estate and businesses is looking for a controller to join it in the picturesque coastal town of Fairhope, Alabama (where Jimmy Buffet spent part of his childhood).
- Goldman Sachs is hiring a private family office client analyst in Albany, New York. At Goldman, these employees manage relationships and support the advisors, who typically each work with 12 or fewer families.
- A family office in New York is looking for a senior associate to do
“personal, ad-hoc errands, including navigating items” between their home on the Upper West Side, their Midtown office and Corient’s Midtown office; medical- and health-related paperwork and scheduling; troubleshooting client IT-related issues; maintaining docs and logs for subscriptions, car services and expenses; coordinating the ordering and delivery of items (aka mail); logistics for personal vacations and travel including flights, hotels, ground transportation, transfers, etc. and providing a detailed itinerary; and other duties assignedthe most annoying things we all hate doing. But the salary is $165,500 so…?
Other Stuff
- ICYMI: I was a guest on a couple of podcasts — a tidy ~30-minute episode of Cognito’s Cogcast and a sprawling (in a good way) ~90-minute episode of Got Spice?, a program by my former Institutional Investor colleague Gregory Yates — to talk about family offices, Modus, and media in general. Check ‘em out!
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Where I'll be...
- New York City throughout February.
- Miami next month for Future Proof Citywide, March 16-19, to moderate a panel about family office governance. I’m adding another person to join me on stage. Who is THE family office governance pro in South Florida that I should call?
- Palm Springs.
A correction made on February 14, 2025: A previous version of this newsletter incorrectly reported that Two Sigma's assets under management were $83 billion, a total reported to the Securities and Exchange Commission. As of this newsletter, a more accurate AUM for the hedge fund is $65 billion.
