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One of the most prolific Wall Street investors you’ve never heard of is preparing to launch a hedge fund.
He’s never been written about in a mainstream news article, but in certain quant finance circles, Hao Zhang is a revered figure. For 17 years, up until 2024, the quant researcher produced some of the most valuable trading signals at $60 billion hedge-fund giant Two Sigma.
A pioneer in applying machine learning to markets at Two Sigma, Zhang is now planning to hang out his own shingle. He’s in the early stages of talking to potential investors and hedge fund service providers, according to five people who’ve been briefed on the plans.
Zhang intends to call his firm Hippocampus Capital Management, the sources said, and is targeting a launch date in early 2026, one of the people said. It’s not clear how much capital he’s looking to raise. Zhang’s contract with Two Sigma prohibited him from raising money from investors before July 1, the people said.
Industry sources expect the launch to generate significant interest from investors, given Zhang’s reputation and track record. His alpha research has been responsible for billions in trading profits for Two Sigma over the course of his career, the people said.
Zhang did not respond to requests for comment. Two Sigma declined to comment.
The techniques ‘godfather’
Two Sigma, which has 1,700 employees today, was a comparatively small firm when it hired Zhang in 2007, operating in what was then the secretive hedge fund niche of quant trading.
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The fund was on the vanguard of machine learning, an early artificial intelligence method that helps computers make decisions and predictions, and recognize patterns. Zhang, with his specializations in both stats and computer science, early on developed lucrative trading models focused on machine-learning non-linear techniques — uncovering complex, non-obvious patterns in market data — people familiar with Zhang said. The group that evolved around such strategies took on different names over the years, but staff shorthand was often simply “techniques.”
While Two Sigma would pursue other machine-learning initiatives, techniques became the crown jewel and a closely guarded secret. Some refer to Zhang as the “godfather” of the unit, according to former employees.
People familiar with Zhang, including two former Two Sigma employees, said the billions of dollars attributed to his trading models make him one of the top researchers in the company’s nearly 25-year history.
The small footprint Zhang does have online comes from university press stories connected to his donations — which have ramped up in recent years — to the California Institute of Technology and the University of California at Berkeley.
Zhang transferred from Fudan University in Shanghai to Caltech in 1997 to study engineering and applied science, later earning a master’s in statistics and a Ph.D in computer science at UC Berkeley.
“That training and education has been a cornerstone in my life,” Zhang said in the 2024 announcement of his endowment of a Berkeley professorship.
While studying at Berkeley, Zhang lived with another math and stats whiz named Peng Zhao, according to several people who know them. Zhang joined Two Sigma after completing his doctorate; Zhao helped build Citadel Securities, where he was named CEO in 2017.
Two Sigma’s tumultuous two years
Two Sigma has historically maintained a low profile, as is common with quant investment firms.
But its last two years have been uncharacteristically tumultuous, highlighted by the long-simmering cold war between founders John Overdeck and David Siegel that burst into public view in 2023. The firm grappled with another scandal that year when a rogue researcher from the techniques unit was accused of unilaterally tampering with trading models, resulting in a Securities and Exchange Commission investigation and $90 million in civil penalties earlier this year (Two Sigma denied wrongdoing).
A series of organizational reorgs have also transpired, as well as senior leadership departures and layoffs.
Zhang’s techniques unit hasn’t been immune to the leadership shakeups. Ken Baron stepped down in 2024, and Kan Huang left for Cubist Systematic Strategies last fall. Zhang went on sabbatical last year and departed in late 2024, the people said.
He racked up tens of millions in compensation over the years, according to people familiar with the matter, which will come in handy in launching Hippocampus. Quant fund startups are notoriously expensive to get off the ground — costing millions for the necessary data and technology — and can take years to yield returns.
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