How to earn $23m aged 33 as a quant in a hedge fund
If you're wondering how to switch up your compensation in 2024, the petition filed shortly before Christmas by Jian Wu, the Chinese quant who earned $23m working for hedge fund Two Sigma, could be a source of enlightenment.
Wu says he intends to bring a defamation claim against Two Sigma after his name was reported in a Wall Street Journal article citing unidentified sources claiming that he was the researcher at the fund who made unauthorized changes to investment models that led to $170m in losses. Two Sigma, which didn't immediately respond to a request to comment for this article, told Bloomberg the defamation claim is "frivolous and without merit."
Irrespective of the merits of Wu's case, his petition contains helpful insights into his career, his pay, and what he actually did to earn it.
The petition describes Wu as an "extraordinarily talented individual who performed for Two Sigma at an exceptionally high level."
Wu grew up in Hefei, Anhui province in China. He received a bachelor of engineering degree in automation from Tsinghua University before completing a PhD in operations at Cornell University in the US in 2017.
After leaving Cornell, Wu initially got a job as a "quantitative researcher at a large hedge fund" before leaving for Two Sigma. At Two Sigma, he earned $385k in 2018, $500k in 2019, $4.2m in 2020, $2.8m in 2021 and...$23m in 2022.
What did Wu, who was based in New York, do to merit such generosity? His petition states that he used, "his mathematical and engineering skills to develop complex quantitative models to drive successful financial performance." By virtue of these skills, Two Sigma promoted him to VP and then senior VP of quantitative research.
The petition states that quant researchers at Two Sigma are all about developing Java-based (among other) models that, "rely on patterns inferred from historical prices and other financial data in evaluating prospective investments." It claims that Wu's was, "strictly a technical model research and development role," and that he had no decision in whether to deploy his models, which related to six equity investment portfolios. Instead, Wu says that he and all Two Sigma researchers were expected to develop their models and then submit them for an approval process. However, once a model was deployed, he claims that researchers were expected to monitor its performance and to make changes as required.
Wu says he changed the parameters to his models in 2021 and 2023 and "caused significant positive returns in the funds for which he was responsible."
For this, he was paid $23m.
Unfortunately, something appears to have gone wrong, generating the $170m loss. Wu's petition says this was due to Two Sigma's "reckless decision to deploy the models" designed for "the Six Core Long-Short Portfolios into long-biased portfolios and non-core portfolios in order to grow Two Sigma’s revenue."
Two Sigma, which has placed Wu on leave and removed all his devices and access to its network, intends to fight the case.
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