Two Sigma, the $60 billion quant firm whose co-founder has warned of the threat automation poses to the global workforce, is starting a group to back companies that develop their employees’ potential.
The new unit will make private “workforce impact” investments, with a goal to find consumer, business-services, education and health-care companies that “unlock human potential,” Two Sigma said on its website Thursday.
Investments designed to be both socially and financially rewarding are surging in popularity. The COVID-19 pandemic and racial unrest in the U.S. have underscored inequalities in society, vaulting the “S” in ESG — or environmental, social and governance — investing to prominence.
The new business, Two Sigma Impact, will focus on mid-size companies in North America, investing about $50 million to $100 million per deal over five years or so, said a person with knowledge of the matter, asking not to be named because the details aren’t public.
Jesse Comart, a spokesman for the New York-based firm, declined to comment.
The unit will apply Two Sigma’s technology and data-science resources to the investing process. The team of 12 includes three partners who previously worked at Bain Capital, and David Saltzman, a veteran in the philanthropy world who joined the firm in 2017 after more than two decades at the Robin Hood Foundation.
As money flows to technology and data-driven businesses, less capital goes to companies that depend more on human capital, according to the quant firm. In 2016, Two Sigma co-founder David Siegel said he was “very worried” that machines could soon cost large swaths of the global workforce their jobs.
Assets in impact funds swelled to $715 billion at the end of last year from $8 billion in 2012, according to the Global Impact Investing Network. Nuveen, Allianz SE and KKR & Co. are among firms with impact-investing groups.
Two Sigma Impact is part of the firm’s private-investments group that includes venture capital. The firm’s biggest business is hedge funds, and it also has units dedicated to insurance and market-making.