For Commodities Equities PMs, do they come from a background in physical —> MBA —> equities world? Or are they equities specialists from the start?
What sort of alt data / modeling do MMs use, as I’m sure they use forecasts from the research teams in commodities pods? Curious how this works.
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Work in O&G/chemicals, PM did standard ER/IB background before grinding away at various MMs.
How do models forecast spot price of oil? Curious how you guys use alt data in modeling process because in traditional commodities we use lots of weather / pipeline / supply data for models. Btw I’m in college but have extensive exp trading nat gas. Looking to switch from pure nat gas into equities tho.
In the tight MM idio model, the price of the underlying should be pretty irrelevant for driving the thesis. Usually just use the forward curve, and the main drivers are gonna be specific basin outperformance (in the case of O&G), relative value plays (which probably pop up more than you’d think when running NAV), and other company-level stuff. If you’re interested, the founders of Deep Basin Capital (ex Citadel PM, started own fund, then shut down) did a cool podcast on either Invest Like the Best or Capital Allocators.
My points above don’t apply if the commodity is more niche market than o&g (i.e. obviously commod can be the main driver if it’s a specialty chem), or if fund setup is a little more risk-on. Heard that P72 and looser places will let equities books buy underlying commods.
Not related to post but saw a tweet yesterday that Citadel commods takes home at least mid 9 figures a year which is just f-ing ridiculous.
From my experience the O&G equity people I have met usually tend to be value investors, so they approach the valuation mostly from costs/efficiency side. So understanding cost structure, tier1/tier acreage, tax rules and so on is much more important than anything in depth on the physical side can teach you. ER/IB is the typical background.
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