Citadel Physical Commodities

Anyone have any insight into Citadel's physical commodities group, particularly in the energy space? I know they're one of the few hedge funds that actually operate in the physical space but wanted to get any insight/opinions on them vs a major/trading house? I know they have a large West Coast physical nat gas presence, but any insight into the group is greatly appreciated when it comes to their ops/trading roles (i.e. culture/salaries/growth/work life balance etc.).

Comments (9)

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Mar 22, 2021 - 12:21pm
marcellus_wallace, what's your opinion? Comment below:

Ken, has always been into having "alternative strategies", commodities and energy play a key role in that. He has always tried to find the best and newest brains in the space and lure them. Citadel over the last 2-3 years has probably the best European power and gas team, very strong physical west gas desk as you said and always has a sizeable position in nat gas options and futures. Likewise they have entered/exited crude trading multiple times over the last 5 years. They have purchased more power trading/weather trading desks in the last few years too. Further Ken just opened his pocketbook and got the former head of MS commodities to join him to build a brand new full power/gas North America team to finally get his North America success to levels of his European team. Well call it luck, call it good timing, call it Ken knowing what he is doing, that success came very fast this Q1, as the guy he hired with the current team probably helped them navigate Q1 better than most (they put up a massive # in Q1).

Growth/Culture/WLB: Ctiadel is not the place you go to grow unless you are a whiz kid out of school. It's where you go to be what Ken calls "the best at what you do", he will typically suck the knowledge out of you added to the firms mainframe and toss you away in 2-3 years very similar to lots of banks. The only people who grow last 2-3 years and have all the tools to grow into a PM style Ken likes (rare few), Ken is known to hire people get the knowledge he sees then go out and get a major risk runner PM to give the tools all to that person. The culture/wlb is probably the worst of basically anywhere, the constant pressure/the fire drills/the citadel risk/quant approach. The retention, the noncompete and so on. Basically it is very tough to compare to large trading house, since the culture is a total 180.

Why would Anyone go there: Well with all the above pain comes the other side of the coin. Ken is probably going to pay you more than anyone else and will give more guarantees/retentions upfront than anyone else cause if the "knowledge" you bring they do not have its worth it to him. So salaries are very high compared to any other place. Then the opportunity to grow your book/size-up is near unmatchable at other places as long as your style fits into firm strategy/risk/quants no where else is going to let you swing like Ken will. You are surrounded by some of the top talent out there and you are being pushed to the "edge" everyday the coverage and skills you gain from that abuse is hard to match.

Many people I have known gone there have burnt out/been let go in that 2-3 year window but all came out with plenty options afterwards. Very few established PMs would be willing to deal with that culture/Ken in general that said especially when most major trading houses will let you make your own hours and just do your thing. The guy who runs the "Physical Gas Business" it is not just a west gas group anywhere at all basically went there with an entire business plan in mind and no one else could bankroll his ideas like Ken. Ken wanted to duplicate what JAron did in 2014 and they have gone well beyond that level in recent years in terms of coverage.

  • Associate 2 in S&T - Comm
Mar 22, 2021 - 12:46pm

Really appreciate the detailed reply. So basically exactly along lines of what I was thinking just needed to hear it to confirm. It's basically a late/end of career move not really early/mid. Go there when you're established, get paid out and hope you last. Doesn't seem worth the hassle/risk early/mid career if you're already set up nicely to progress trading wise at a major/trading house. You'll be basically competing with everyone and their brother for a PM role and odds are you're going to be locked into whatever role you come in at or let go in 2-3 years. I know with Jay onboard they're supposedly looking at some big things in NE power/gas and recruiting aggressively to expand in the region.

Mar 22, 2021 - 10:20pm
marcellus_wallace, what's your opinion? Comment below:

I agree with your assessment. Knowing the talent that has through there and how much they took marcellus modeling into their directional views over last few years. I would think they are pretty decent/strong on the gas side just do not deploy capital directly there for a while. With Jay there now for sure I think they will look to grow that as well as West Power and even TX where they are strong on gulf gas now.

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  • Analyst 3+ in IB - Cov
Mar 23, 2021 - 4:51pm

Out of interest, is your view the same for other large hedge funds trading a mix of paper and physical? If I am not mistaken DE Shaw has a similar investment strategy as Citadel, and they dabble in physical, but not as big (and their culture rep is better)?

Mar 23, 2021 - 10:07pm
marcellus_wallace, what's your opinion? Comment below:

DE Shaw is an odd firm, they do not purposely want to dabble in the physical unlike Ken. They find PMs that fit and those require/want to trade physical at times. Physical trading gives them an informational edge as it does for everyone else at times.

That said Citadel trades physically way more than DE Shaw does these days.

May 23, 2022 - 7:06pm
Chargeupenergy, what's your opinion? Comment below:

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