I will be starting at a fund that focuses on energy markets.
The options are crude oil, refined oil products, natural gas and then European power.
Any advice would be welcome on the positive or negatives of any of the above desks for long term career opportunities.
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Anything physical you'll be good
What are the major benefits of physical compared to paper?
There's 2 benefits to me.
1. Relationships. You get a lot more exposure to people on the physical side.
2. Proper understanding of the business. You can be a good financial trader without every fully understanding the business but the physical side will teach you how everything works and why each piece is important.
If its a fund that does those products highly doubt they do much physically. Just go with the desk that you can find the best mentor and most comfortable with the people.
I agree with this and add go to what interests you the most. Power and nat gas are the big money makers today but 5 years from now who knows what it will be like.
Historically has that always been the case or does oil have its time too?
Time to deal with Russia? :)
Nat gas / power are king
Any reason for that or just personal experience?
For a fund, I tend to favor power and gas. Because a fund’s focus is analytics and trade based on data. This is much more widely available in power and gas (ie temperature and wind speed are much less proprietary than a fuel oil desk talking to another company about what whether a cargo is hssr or vgo. And statistics work much better in gas and power. I also think there are more jobs at funds that trade power and gas than oil.
Stay away from refined products with exception of maybe diesel
Why should one stay away?
Lowering demand for products such as gasoline and naphtha. Diesel demand may not decline as quickly.
Is this a market making firm or an oil-centric fund? UK, US, Europe... ?
Prop in the energy section at US fund in the UK.
Ok, doesn't provide much additional colour, but of course don't want to put you in the position where you have to name the firm explicitly
First things first, you probably won't develop the same kind of expertise as you would starting a grad role at one of the majors (e.g. BP, Shell) or at one of the big trading houses (e.g. Glencore, Trafigura)
Naturally, you won't start out as a trader at any of these firms (2-3yrs grad rotations, 2-3yrs full time role in ops / risk / analysis, trading exam, junior trading role), however you'll be given a more comprehensive education (admittedly more so on the physical side than derivatives)
That said, there are of course good funds out there that trade energy, and where learning opportunities will be regardless still be superb (converse to the above, more so in derivatives / macro than physical)
Ultimately, it depends what you want your long-term career to look like
If you want a hedge fund / prop-orientated career, then starting off at a fund is probably best; if you want a more specialised career, then starting off at a major / trading house is best
A bank seat will give you insight into both, without the same depth / responsibilities - indeed, it's ultimately a very different sort of job
Regarding the desks you've mentioned in the initial post, there's really no right or wrong answer
Some others may say, "Oh, Desk X has this market outlook, and Y this market outlook, so you should opt for Z," however your career progression will, in the end, depend on your competency, which in turn boils down to how interesting you find your market and how effective you can be in a seat that deals with that market - if you do well in that seat and make a name for yourself, but the market starts to decline, you'll likely have flexibility to switch seats because of a proven track record (I speak in terms of efficacy, not necessarily P&L, however the latter of course helps too)
Just from what's faddish right now, I'd rank as follows (best to worst): i) Natural gas; ii) Crude oil; iii) European power; iv) Refined products
However, even within refined products, there's a spectrum (middle distillates and gasoline look interesting right now, possibly diesel, less so fuel oil)
Couple more comments…
The fund world works much different than a major/merchant world. It is very possible to start trading 12-18 months into your role. In fact one of the main reasons the majors do not allow that is they hierarchical organizations which require you to wait your turn even though at 2 years most people do not learn much more.
While oil fund trading is much less data intensive than “gas/power” there is still lots of purely financial traders at funds who trades across the barrel. As there is various arbs across different products and instruments.
Again find what enjoy and people you like. Coming into a fund, the bar is much higher and unlikes a phys shop there is no set role. You are there to work hard and impress from day 1 or you will be replaced 18months later just the way it works. While at a phys shop no one will even be discussing your future till 8-12 months in and let you get your feet set.
Is there any route into the industry that you see as the most favourable when looking at risk adjusted? I would love to say that I have a 100% certainty of going in there and absolutely crushing it and getting my own book in 12 months and never look back but things can always go wrong as a junior by just messing up on something u didn't quite grasp fully or underestimate the effect of x on y and suddenly u have no liquidity and your in a loss. Is it almost better to start out at the major/merchant and if you love financial trading and are a top performer then to transition over to a fund at a later point?
None, this is why its imperative to do what you enjoy. The only thing a major provides you is a longterm brand and reason to stay in business and good people they keep around.
I have seen people do 3-5 year programs to end up on a desk in a low vol environment grind for 3 years and quit to go back scheduling. Only for the next trader to own all thr texas storage they acquired into uri.
I know someone who at a major 8 months in, their boss was fired and 2 years later an entire reorg and so on. Just a couple of many examples.
Only reason I say “the bar” and “opportunity” is different at a fund. Is at a physical shop, your cost accounted for. The role in risk/contracts/scheduling still would exist and someone more senoir would do it, you are cheap labor. At a fund you are just a direct cost center and plus a good trader will prolly spend 1 month to ramp you up and show the ropes. So majority of days you are working on your own skillet and projects, there is no daily 9-5 job. No one has the time to manage you, have to manage yourself.
Missed last part of your message. If you enjoy financial trading and s/d discussion, fundamental discussion all day. You may also not fit into a major and not enjoy your time. Again the people you close to are key.
Can anyone opine on the competitiveness between naphtha and LPG as feedstock
Nice try competitor! :p
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