In a surprising turn of events, the billionaire founders of the renowned hedge fund, Two Sigma, have agreed to step down, potentially putting an end to one of Wall Street's most prolonged boardroom battles. John Overdeck and David Siegel, who established Two Sigma in 2001, will hand over the reins to two new co-CEOs after years of conflict over the firm's direction and management of its $60 billion in assets, which includes the use of AI in its trading strategy.

The strained relationship between Overdeck, aged 54, and Siegel, aged 63, had become so toxic that Two Sigma, known for its secrecy, issued a warning in a regulatory filing in March 2024, stating that their ongoing feud posed a "material risk" to the company's prospects. The filing revealed that the firm was facing management and governance challenges, with the management committee unable to reach agreement on numerous matters. Additionally, the dispute was impacting the firm's ability to retain and attract senior employees.

Despite their differences, Overdeck and Siegel will remain involved with the company as co-chairmen, focusing on advising on quant investing and technology. Taking over as the new joint chief executives on September 30 will be Carter Lyons, the chief business officer with a 13-year tenure at Two Sigma, and Scott Hoffman, a former Lazard general counsel.

In a letter to investors, Overdeck and Siegel expressed their dedication to ensuring the long-term success and stability of Two Sigma. They stated that stepping back from their day-to-day management roles was the right decision, expressing confidence in Lyons and Hoffman to guide the firm forward.

Overdeck will also relinquish his role as chief investment officer of Two Sigma Investments, being succeeded by Ali-Milan Nekmouche, while Geoff Duncombe will continue as the chief investment officer of Two Sigma Advisers. The hedge fund, split between these two entities, employs around 2,000 people globally, with two-thirds of them in research and development positions.

The performance of Two Sigma's funds has remained strong despite the internal conflicts. Bloomberg reported that the Absolute Return Enhanced Fund gained 10.6% in the first half of the year, while the flagship Spectrum Fund rose by 6.1%. As the new leadership takes charge, investors will be watching closely to assess the firm's future trajectory in the competitive world of hedge funds.