Pivoting from Commodities
Funemployed mid-30s denizen here, hoping I might benefit from WSO's collective wisdom.
This might read like a novel, so I've broken it into a few different chunks. Keen to hear people's thoughts/ideas, constructive criticism, identification of my cognitive blind spots, etc. - many thanks in advance for your input.
A mentor said recruiting with my CV and focus area should be like "elephant hunting with an elephant gun at the elephant cage in the zoo...full of elephants." Somehow it hasn't felt that way.
Feedback I typically get on my profile is "unique"...I translate this as wide bid/ask spread and tough to value.
- 7 years @ #1 global commodities house: 2yrs risk + fundamental analysis, 5yrs principal investing / origination
- Internships @ energy-focused HF and a big ag/bioenergy firm
- MBA + International Affairs MA @ M7
- 3yrs @ BB IB in APAC
- HYP undergrad
- Active PA investor focused on the "commanding heights" (energy transition/cyclicals/infrastructure/global macro)
I wore multiple hats with continued upward progression at the commodities shop over 7 years, but as the firm pivoted from asset-heavy to asset-light in the energy space, appetite to staff non-trader front office roles diminished and I recently got laid off.
I'm keen to pivot away from the trading house niche (and avoid Houston...sorry Texans), expand beyond oil & gas (my green cred is limited to renewable diesel), and ideally land a buyside investing gig aligned with my background and interests.
I've focused on HFs as they seem like a good vehicle to combine the mental models from my commodities/energy value chain experience and corporate finance/IB training. Commodities is a black box for most folks that know valuation/corp fin, and vice-versa...voila! Bridge the gap and bring differentiated insight.
I tend toward contrarian perspectives and like identifying bottlenecks/inflection points and regime changes/structural shifts, positioning relative value trades around who will benefit and who will get hurt, and managing risk appropriately to make money. Developing a robust variant perception interests me more than the slow sausage-grinding process of dealmaking (though I have a polished/fratty side that works well in an origination context).
Results So Far
I had one process with a big pod shop HF go eight rounds, only to get edged out at the final stage by someone with previous HF experience - agonizing but...perhaps...affirming?
When I asked for feedback, the PM said he would have changed nothing about how I handled myself through the whole process (pitches, case study, PM interviews, management interview, etc.) but ultimately as a new PM making his first hire, he opted for someone with direct experience in the role.
I later interviewed at two other $50bn+ AUM HFs (one MM, one global macro) and it looks like no luck with either of those.
My CV seems to tag me as "mid-career" and "expensive", though I am long-term greedy (flexible on short-term comp for the right gig) and give zero fucks about title (Associate level at a great shop = not the end of the world). A friend likened my conundrum to that of a girl at a bar that is so attractive, guys are too intimidated to make a move...not sure this is the reality, but it's nevertheless tough to get my foot in the door.
Within the HF space, I think I need to expand focus beyond big names and knock on a lot of doors.
Outside the HF space, I'm open to any of the following: long-only AM, family office, banks/SWFs (energy transition or real assets teams), or any other institutional investor where there'd be a fit. I've applied to some of these online and gotten minimal traction.
I'm likely a bit off-spec for most PE funds, but not opposed if the thematic focus aligned well.
If all else fails...perhaps a data science bootcamp or something could add some appeal to my profile?
Getting a bit frustrated at this point - it would be helpful to hear what I might want to modify for better results.
Just reiterating what you already know, but you have a very impressive resume. However, so do a lot of successful people in the HF/PE space. But keep your head up - it's just a numbers and time game for you.
If you're not getting enough leads on suitable positions, I'd recommend starting there and figuring out how to increase those before worrying about anything else you're doing. Are you actively working with multiple recruiters? Also, you should reconsider Houston. PM me if you want to know anything about the city.
Thanks for the encouraging words!
I've had frustrations with recruiters - I can count on one hand those that "get" the commodities trading house business model and also have connectivity in the buyside investing space. The archetypes I encounter most are the following:
1) Headhunter fresh out of undergrad focused on high volume/low margin recruiting of hawking 2nd yr IB analysts and PE associates to HFs. Minimal appetite for candidates outside the homogenous profiles that are their bread and butter for placements.
2) Veteran headhunter focused on low volume/high margin bespoke approach to place senior executive level hires. If you're under 40, probably not interested in you.
At my experience level, I'm too old/weird for the first group and not old enough/senior enough for the second group haha.
I want to expand beyond hydrocarbons as my core focus - Houston seems to me like just a step deeper into that rabbit hole. I'm open to being persuaded otherwise, but my sense is for buyside equity investing roles the northeast is a more target-rich environment.
You have a lot of impressive experience. But at the same time, that experience is perceived as not being directly translatable to an immediate commercial benefit.
So if a hedge fund is hiring for a PM or Analyst, from my experience, they want someone who was already trading or coming up with/evaluating trades professionally. This has been my feel from talking to a number of energy hedge funds over the years (though more focused on futures as opposed to equities, which you seem to be targeting). So targeting hedge funds as a way to transition might not be appropriate since they don't have the patience to train people, especially experienced hires.
What advice would I have? Not sure if it's going in the direction you want, but I would lean towards a more corporate, less immediate pnl, long time horizon company. You can probably find roles at the supermajor trading arms that align with your experience. And if you want to move to a fund later, become a really good trader or analyst.
Thanks for your comments. It sounds like you were envisaging a scenario where the goal is to go to an energy fund and trade derivs (flat px, spreads, cracks, arbs, options, etc.). Your advice is spot-on for that, but it's pretty different from my situation - I don't want to trade energy derivs, build S&D balances for derivs traders, or move to Houston.
My goal, ideally, is long/short investment analysis on equity names in energy (O&G + renewables), mining, ag, and cyclical industrials. Interviews I've been doing are mostly stock pitches and case studies - more "which midstream names are relatively undervalued here? which shipping company would be a good short?"...not "how do you like WTI CSOs at these levels? what's your view on Q1 arbs?" - if that paints a picture.
I agree many HFs have little appetite to train people, though I'd say for equity investing it depends on the fund - having a background "in industry" with subject matter expertise and a network can be positive. The PM at the MM pod shop I went to final round with emphasized this and said the buyside research skillset could be learned on the job, fwiw - but I still got edged out by a guy with prior experience since this was the PM's first hire.
In terms of building experience, I think a stint in equity research at a bank or an Alliancebernstein type shop or something couldn't hurt, but the fact I got as close as I did with one of the Top 4 pod shop HFs tells me it's worth pushing for a buy side gig first/in tandem with sell side opportunities as a back-up.
Interested. Also what are recommendations to get smarter in energy / infra investing?
My background is more weighted to commodities, but there is commodities exposure in almost all forms of energy - think of the copper in Solar PVs, nickel + cobalt in EV batteries, ag-correlated feedstocks in renewable diesel/sustainable aviation fuel, etc.
Some forms of energy require these inputs on an ongoing basis (ex.: fuel for gas-fired power generation) so the commodity exposure is in Opex, others are front-loaded with the commodity exposure in Capex (ex.: steel in wind turbines). Understanding the commodity exposure, how these forms of energy interact as potential substitutes for each other, and macro business cycle can help you form a high-level view.
Study the full value chain "from molecule to market" (from sourcing of inputs down through transportation, processing, and end market consumption) - at each node, identify the economic drivers, real world logistics (storage and transportation), which players operate in each segment, who finances them, where are the risks and when/how do you get parabolic price action due to a bottleneck or some other catalyst.
If you are going long an undervalued upstream oil company, for example, the price performance of that stock will be highly correlated to the futures contract of the commodity produced...do you want to express your variant view on the company in isolation by pairing it with short exposure to the commodity or an overvalued competitor? Or if you're confident supply is tight through your investment time horizon but demand has downside risk, perhaps you short equity indexes of energy importing countries with high oil-intensity of GDP? And perhaps you time your entry point on the long position around a macro selloff where stocks get hit as an asset class but no direct fundamental news for the underlying commodity?
Especially now and in the coming years, high energy prices will feed through into inflation as governments seek to "fix" the issue with sclerotic policy maneuvers - tax the producer! (and disincentivize production writ large, leading to...higher prices)...subsidize the consumer with the high energy bill! (enabling them to consume more than they would otherwise, boosting demand and leading to...higher prices).
Pair this with structural underinvestment in the energy sector because 1) US shale had a decade of shitty returns; 2) investors collectively cared more about TikTok and crypto than how we keep the lights on; and 3) ESG behemoths steered capital away from shunned areas that we actually still rely upon.
TLDR; read Daniel Yergin, follow the RBN Energy blog, listen to the Smarter Markets podcast, and grab some sell side primers on the energy space.
sorry if this is a dumb question, but when you were doing fundamental at a commodity trading house it was paper trading as opposed to physical, correct?
The fundamental analysis function is not separated out into paper or physical - if you're building a supply and demand balance for a commodity, it's rarely relevant for just phys and not paper (or vice-versa).
You're analyzing real world variables (imports and exports by ship, pipeline flows, production forecasts, refinery turnarounds/outages, storage volumes, etc.) - primarily physical focus, but extremely relevant for paper prices. I have never seen a "paper only" analyst that doesn't follow those physical fundamentals...I guess if you purely looked at open interest on futures contracts, trade volumes, and "technical analysis", then fine...but you'd be missing a lot of the picture.
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