<h2><img src="https://static2.businessinsider.com/image/5fda3da56524f10019792619-2222/david siegel.jpg" border="0" alt="david siegel" data-mce-source="Misha Friedman/Getty Images" data-mce-caption="David Siegel, co-founder of Two Sigma Investments LP speaks on September 13,2017 in New York, USA."></h2><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>A high-profile fund has already seen a big uptick in adoption of software it spun off last year in an effort to drum up new business. </p><p>Two Sigma, the $58 billion quantitative hedge fund giant, already has thousands of the world's biggest allocators plugged into Venn, <a href="https://www.businessinsider.com/two-sigma-launches-risk-analysis-tool-for-fellow-investors-2019-11">the risk-analysis tool it officially launched in November 2019</a>.</p><p>Venn is the New York-based firm's forward-looking risk and analytics system marketed toward allocators of assets, such as pensions, endowments, and family offices. New features rolled out this year include factors such as crowding, which shows the amount of short positions against a stock, and analyses for extreme scenario simulation, which lets users test their portfolio against hypothetical crashes.</p><p>Jake Dwyer, Venn's general manager, told Business Insider in an interview that clients, have gone from 1,000 at the beginning of the year to more than 2,200and revenue is up four-fold since the start of 2020. </p><p>Where Venn goes next is critical. The <a href="https://www.businessinsider.com/asset-managers-blackrock-invesco-pimco-resembling-consultants-tech-service-2020-11">asset manager of the future</a> combines asset management skills with a consultant-like ability to answer clients' biggest questions. Massive asset managers <a href="https://www.businessinsider.com/pimco-internal-memo-new-tech-team-to-rival-blackrock-aladdin-2020-9">like PIMCO</a> and State Street are trying to emulate BlackRock's massive Aladdin portfolio and risk management system with new offerings or, in State Street's case, the acquisition of Charles River. </p><p><strong>Read more:</strong> <em><a href="https://www.businessinsider.com/asset-managers-blackrock-invesco-pimco-resembling-consultants-tech-service-2020-11">The asset manager of the future looks like a consultant. Here's how firms like BlackRock, PIMCO, and Invesco are preparing for it.</a></em></p><p>Two Sigma believes it has a leg-up on many in the asset management, mostly because it's not an asset manager, according to Dwyer"We consider ourselves a technology company."</p><p>"It's hard for any business that is not a full-stack technology company to back into being a technology company," he said. "There's maybe only a handful of asset managers that are out there that have the legitimate and genuine technical expertise to put forward a platform that doesn't just have research capabilities."</p><h2>'Aladdin is a beast'</h2><p>Dwyer is clear that he doesn't see Venn as directly competing with Aladdin, which has never-before-seen usage in the asset management world, with trillions of dollars worth of portfolios using its analytics. </p><p>Venn is different in the type of clients it targetsasset owners, like pensions, instead of asset managersand the timeline of its datafocusing on the current portfolio and not historical data. Dwyer said several clients, such as investment teams at large institutional investors, use both Venn and Aladdin. </p><p>"We're sort of acting as a complementary tool that offers a different set of services," he said. "Aladdin is a beast."</p><p><strong>See more: </strong><em><a href="https://www.businessinsider.com/blackrocks-larry-fink-proud-aladdin-made-it-as-a-tech-start-up-2020-1">Larry Fink, CEO of the world's biggest asset manager, says BlackRock's massive Aladdin platform is really just a tech startup</a><strong><br></strong></em></p><p>That said, Dwyer said the volatility wrought by the pandemic's start in the US in March led to increased usage on Venn, including for purposes that hadn't been popular for users before.</p><p>"It was not our position previously to be the place that people went to check on markets, frankly," he said, noting most users went "to Bloomberg or other places to find out how markets are performing."</p><p>"We found that people were increasingly demanding more timely insights into how factors were performing day-to-day. And so we tightened up our performance windows for the factors to get next-day report so that you can see exactly how a factor performed yesterday," Dwyer added.</p><h2>Venn's next step: Big banks and international expansion</h2><p>Despite an initial focus this year on attracting clients closer to home, Venn has also found fertile ground in exploring a new, international customer base as the company looks to expand both its reach and the kind of clients it serves.</p><p>"We've really only focused on the US in terms of customer acquisition, but we have clients across a number of countries across Europe and Asia that have come to us and found us on their own," Dwyer said. "So targeting those international markets" for further customer acquisition "is another opportunity for us as well."</p><p>Venn's also seen incoming interest both from custody banks, under pressure to ramp up their customer-facing data reporting and analytics tools, and their clients, who have turned to Venn for help tracking and analyzing the assets they hold with their custodians.</p><p>Venn can serve "as a front-end for their custodial business," said Dwyer. The company now has the capability to integrate their own technology with asset portfolios custodied at BNY Mellon and Northern Trust, among others.</p><p>"It's been an interesting dynamic working with them and seeing how the trends that occurred in the consumer finance world are finally starting to appear on the institutional side, where people are just expecting more from these legacy institutions," Dwyer said.</p><p><strong>See more: </strong><em><a href="https://www.businessinsider.com/hedge-funds-helping-hedge-funds-2019-4">Pricey data, slashed fees, and poor returns are hurting hedge funds' margins and some are getting in the business of helping their rivals</a><strong><br></strong></em></p><p>That being said, it's a different challenge to work with large bank clients who might be wary of partnering with one of the largest quant hedge funds in the world, especially when client data is involved. It's a fear Dwyer said is overstated.</p><p>Venn clients "are very much getting in our analytics access to Two Sigma research and Two Sigma thinking in the product," said Dwyer.</p><p>"But that said, it's really a one-way street in terms of how the information flow works. It's been a pretty clean dynamic in terms of how we are able to explain the relationship and so far it has been one that clients have overwhelmingly been drawn to versus scared by," he continued.</p><p><strong>SEE ALSO: <a href="https://www.businessinsider.com/asset-managers-blackrock-invesco-pimco-resembling-consultants-tech-service-2020-11" >The asset manager of the future looks like a consultant. Here's how firms like BlackRock, PIMCO, and Invesco are preparing for it.</a></strong></p><p><strong>SEE ALSO: <a href="https://www.businessinsider.com/blackrocks-larry-fink-proud-aladdin-made-it-as-a-tech-start-up-2020-1" >Larry Fink, CEO of the world's biggest asset manager, says BlackRock's massive Aladdin platform is really just a tech startup</a></strong></p><p><a href="https://www.businessinsider.com/two-sigma-venn-growth-risk-analyis-hedge-fund-asset-allocators-2020-12#comments">Join the conversation about this story »</a></p> <p>NOW WATCH: <a href="https://www.businessinsider.com/electric-planes-future-of-aviation-problems-regulations-2020-3">Why electric planes haven't taken off yet</a></p>
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