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January 10, 2018  

Ex-Two Sigma Pro Markets Lockup Vehicle

Orthogon Partners, founded by former Two Sigma Investments executive Rishi Ganti, is soliciting capital for a private equity-like vehicle that would invest in “esoteric” assets globally.

The New York firm aims to raise $200 million of equity for Orthogon Partners 2, whose investment targets could range from litigation financing in Brazil to small-business loans in Mexico to charter-school financing in the U.S. From 2008-2016, when he invested proprietary capital on behalf of Two Sigma’s principals, Ganti generated a 13.8% annualized return, with no down years. To date, he is the only investment manager to market a Two Sigma track record outside of the firm, according to Orthogon’s marketing documents.

Ganti formed Orthogon in 2016 after leaving Two Sigma. His initial offering, Orthogon Partners 1, held a final equity close in November 2017 with $137 million.

Ganti aims to hold an initial equity close for Orthogon Partners 2 before the end of the second quarter. He’s scheduled to meet this quarter with prospective investors in Boston, Chicago, Dallas, San Francisco and Portland, Ore.

Fund 2 would have a seven-year term, with two one-year extension options. Limited partners would receive a 6% preferred return, after which the general partner would be entitled to a “catch-up” distribution. Investors would pay a 20% performance fee on any additional profits. The fund would charge a 1.25% management fee on drawn capital, as well as 0.25% on undrawn commitments for up to a year.

In interviews and speaking engagements, Ganti has been an outspoken proponent of avoiding liquid securities markets in favor of illiquid opportunities that reward patience and expertise. Orthogon often forms joint ventures with local operating partners familiar with the targeted investments. Examples include distressed real estate in Spain, nonperforming loans in Portugal and specialty-finance receivables in Italy.

“Esoterics are non-market, non-bid assets. Investing in esoterics minimizes price competition, raising risk-adjusted return,” according to an Orthogon tearsheet.

Orthogon’s portfolio gained 10% last year through Nov. 30, versus a 7.5% increase for the broad-based HFRI Fund Weighted Composite Index during the same period.

Ganti spent about eight years at Two Sigma, where he was the first full-time investment professional assigned to manage the wealth of the firm’s principals, including founders John Overdeck and David Siegel. Ganti’s strategy is the antithesis of the highly automated investment analysis and trading Two Sigma performs for its clients. The New York firm ranks among the world’s largest quantitative hedge fund managers, with a little more than $50 billion under management.

At Orthogon, Ganti is assisted on the investment side by Brian Lee, formerly an associate at Two Sigma and an investment-banking analyst at Credit Suisse. Ganti’s operations team is led by Branko Belusic, formerly chief financial officer at the Alpha Cooperative and Clearvest, and Dominique Severino, who previously worked at Blackstone and Garrison Investment.

Orthogon is looking to hire an investment professional with experience in deal origination and structuring. And it intends to add a chief compliance officer in the third quarter.