(Bloomberg) — Two Sigma Investments is preparing to raise money for a real estate fund that taps the firm’s expertise in data science, opening what had been an internal operation to outside capital.
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The quant firm’s real estate unit, which registered as an investment adviser on Sept. 25, operates the Two Sigma Real Estate Opportunity Fund and plans to create other vehicles to manage external cash, according to a regulatory filing.
Other money managers are also preparing to raise money to invest in commercial real estate, where developers will have to refinance billions of dollars in maturing debt. Fortress Investment Group, Goldman Sachs Group Inc., and Principal Financial Group Inc. have all set up real estate investment trusts that will specialize in loans tied to commercial properties, a category that includes shopping centers, office towers, apartment buildings and industrial sites.
A spokesperson for Two Sigma, which manages about $60 billion, declined to comment.
The Real Estate Opportunity Fund plans to bulk up on properties in the housing and industrial sectors, while taking a “strategic” approach to other types of commercial real estate such as hospitality and office buildings, according to the filing. While the vehicle will operate as a private equity fund that acquires real assets, it will also have the latitude to buy publicly traded securities.
Two Sigma started the real estate unit in 2021 as part of its private investing business, which also includes private equity and venture capital. The unit’s chief investment officer is Rich Gomel, who previously worked as the managing partner of WeWork’s property investment platform.
The real estate unit incorporates Two Sigma’s quantitative approach to investing by working with a team called Strategic Data Science to help inform its decisions on property deals.
The Real Estate Opportunity Fund will initially charge a management fee of 1% to 1.5% of aggregate commitments, as well as carried interest equaling 20% of net realized profits in excess of an 8% compound preferred return, according to the filing.
Two Sigma’s founders, John Overdeck and David Siegel, disclosed in August that they would relinquish day-to-day management to two new co-chief executive officers — Carter Lyons and Scott Hoffman — at the end of September. Overdeck and Siegel, who had feuded for years over how to run the firm, remain as co-chairmen.
–With assistance from Hema Parmar.
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