Physical Commodities to LO AM
Probably falling victim to the latest WSO groupthink here ('T1 LO AM is the best career ever!'), but is there room for people with physical commodities trading backgrounds to move to T1 LO AM as analysts (and eventually PMs)?
Feels like there is some skill overlap in terms of research, talking to industry, appreciation of risk, quickly identifying value drivers... obviously modelling skills are nothing like someone who's done IB/PE/Pod Shop...
I am pretty convinced being long commodities is crucial to my career, just trying to think of whether there are better ways to skin that cat so to speak.
Based on the most helpful WSO content, it seems like there could be potential for a transition from physical commodities trading to T1 LO AM. The skills you mentioned such as research, industry communication, risk appreciation, and quick identification of value drivers are indeed valuable in both fields. However, as you've noted, the modelling skills required in investment banking or private equity might be more advanced than what you've used in commodities trading.
That being said, your unique background in physical commodities could provide a fresh perspective in asset management, especially if you're looking at roles that involve commodities or related sectors. Your practical understanding of the commodities market could be a strong selling point.
However, it's important to note that this transition might require additional training or education, especially in areas like financial modelling. You might also need to be prepared to start at a lower level than you're currently at, as you'll be moving into a somewhat different field.
Remember, every career path is unique and there's no one-size-fits-all answer. It's always a good idea to reach out to professionals in the field you're interested in, or even consider getting a mentor. They can provide valuable insights and advice tailored to your specific situation.
Sources: Physical Commodity Trading, Books on Physical Commodity Trading
Probably doable, maybe would need to go through an MBA first.
You would be best suited moving to cover a sector like materials / energy / etc where your understanding of commodities could actually be useful. Unfortunately those are not necessarily the “best” sectors from a career perspective however eventually you could transition elsewhere.
I would be careful with how you sell your experience. Some PMs might dock you for viewing commodities trading as investing vs something more speculative. I know mine probably would.
Thank you. Don't love the idea of having to do an MBA (opportunity cost is absurd unless I definitely am making 500k+ with reasonable WLB within a few short years...) or of a boss viewing commodities trading (at least physical) as speculative.
Starting out covering those sectors is definitely the best (if not only) fit I can see.
Is there any room in the industry for networking/lateraling into sector analyst positions? Doubt there are more than a handful of seats where there would really be a fit.
You asked about T1 LO AM, so no there is no shot of you lateraling to one of those as an analyst without an MBA. But yeah, you could expect to be at $500 relatively fast. Starting comp is 300-350 at T1 shops.
You should shoot lower because many T1 funds hire people from MBA who had buy side experience before school, or banking/consulting. Still would expect to hit around 500 2-3 years after school.
I’m sure you could find a small fund to lateral to but if you’re looking at the big scaled players they all hire out of MBA. You’re not going to find many reputable LOs trading commodities.
There’s no way without the MBA. Going to be honest with you. You have 0 applicable skills for AM. Mind you even going through a MBA means you’re competing with IB+PE guys.
Thanks all.
Why would you want to move from physical commodities NOW?
I think I’m a better analyst than salesman.
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