Commodities PE to commodity HF/Pod?
I currently work on the privates team at a firm focused on real assets and commodities. I’ve gained a solid amount of exposure to ags/softs markets, with some light exposure to the risk management side of the assets we own. It’s an interesting role, but I’m wondering whether my background (buying/managing physical assets) would be transferable to a commodities team at a fund.
Looking at teams like Citadel’s, a lot of people seem to come from trading/research/quant roles at the ABCDs. Does anyone have insight into whether there’s a pathway into a commodities HF role without first taking a pay cut to go trade at one of the ABCDs, knowing that the path may not even work out?
For those who have gone through the process, I’d also be curious what the interview looks like and what these teams are looking for.
The problem is ultimately that the HF commodities industry and PE commodities industries look at things very differently. For HFs, it's all about the spread. You see a lot of people coming from quant and trading, that's because they're incredibly good at making spread. When you buy a business like in PE, you're not focused on spread, you're focused on profit. That doesn't translate well into trading where everything is about that spread. When you're buying a commodities business, you care a lot about valuation and such and the broader market of that commodity long term. As a trader, I could give 2 shits about the real value of a product, I care purely about making spread. It's just different mental models. I'm sure there are hedge funds doing work closer to what you want, but every big shop these days wants to be market neutral.
This is very helpful and aligns with a lot of what I had suspected. Thank you for the info.
From your point of view, what would make a firm more (or less) interested in my background? Without divulging too much, I’ve received inbounds from “good” SMs in the commodities space but never pursued those roles due to bad timing, so I never was able to get a good sense of what they did/didn’t like about my experience. I am trying to make sense of the type of firm would only want a pure trading background vs one that is open to a more general “investing” background + commodities exposure.
Thanks again. A move like this may not ever be in the cards, but I’d be lying if I said it wasn’t intriguing.
I know yaupon in houston hires people from both an IB and energy trading/S&T backgrounds
I’ve seen trading desks at some of the big places (Cargill, Vitol, etc.) bid for entire businesses through the lens of getting access to certain product flow. You can make enough on the marketing side that even if the biz loses money the desk still comes out ahead
Citadel has a principal investments desk in their commodities arm.Maybe look into that
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