Investment Banking to Commodities Trading
Hey all,
I'm a junior in the states studying statistics & finance. Will be interning with a bulge bracket bank in their investment banking division. Interned in the investing group of a commodities trading firm last summer.
I've been reflecting on what I want to do after IB and really enjoy the commodities space (crude oil, energy transisiton etc). Frankly speaking, enjoyed seeing the chaotic aspect of this world during my internship last summer.
I was wondering how common it is to move from investment banking to a prop seat at a commodities firm (glencore, vitol etc but also firms like citadel that have significant commodities arms). What skills should I start focusing on and how should I approach the recruitment process? The stats classes i'm taking involve a lot of R so that's one area i'm focusing on.
As for the ib internship, i'm going through group placement and am looking at the industrials, levfin, and sponsors groups (all do modelling at the firm i'm interning).
It seems like most candidates go into this space either right from undergrad or after some time in an operations role.
Based on the most helpful WSO content, transitioning from investment banking to commodities trading, especially in a proprietary trading seat at firms like Glencore, Vitol, or even Citadel's commodities arm, is not unheard of but can be considered a less traditional path. Your background in statistics and finance, coupled with your internship experience in both investment banking and a commodities trading firm, positions you well for such a move. Here are some steps and skills you might want to focus on based on insights from the WSO community:
Deepen Your Market Knowledge: Continue to immerse yourself in the commodities space, especially in areas like crude oil and energy transition. Understanding market dynamics, supply chain factors, and geopolitical influences on commodity prices will be crucial.
Quantitative Skills: Your statistics background and familiarity with R are significant assets. Prop trading firms value candidates with strong quantitative skills for modeling and analysis. Consider expanding your toolkit to include other programming languages or tools commonly used in trading, such as Python and SQL.
Networking: Leverage your internships to build a network in both the investment banking and commodities trading worlds. Networking can provide insights into the recruitment process for prop trading roles and potentially open doors for interviews.
Understand the Role: Proprietary trading roles can vary significantly from firm to firm. Some might focus more on quantitative analysis and algorithmic trading, while others might be more discretionary. Understanding the nature of the role you're aiming for will help tailor your preparation.
Recruitment Process: The recruitment process for prop trading roles can be highly competitive and may include rigorous quantitative tests, trading simulations, and multiple rounds of interviews. Prepare by practicing mental math, probability questions, and participating in trading games or simulations if possible.
Group Placement Strategy: For your IB internship, consider how each group (Industrials, LevFin, Sponsors) might offer relevant experience or skills transferable to commodities trading. For example, the Industrials group might provide exposure to energy and commodities sectors, which could be beneficial.
Remember, while moving directly from undergrad or through operations roles into commodities trading is common, your unique blend of investment banking experience and a keen interest in commodities could set you apart. Focus on building a solid foundation in quantitative analysis, market knowledge, and networking to navigate the recruitment process successfully.
Sources: Prop Trading (MM) v.s. BB Sales and Trading, Why pick S&T over Prop trading?, Why choose Sales and Trading over Investment Banking?, Ask Me Anything - Current Prop Trader/Advice for people wanting to make it/Breaking in, Is it uncommon to see a move from phys commodities to steel?
as an summer intern.. its very common and happens all the time... you don't have any real exp from an internship that one or another is going to judge you for a new hire post college
Agree with this. Internships are not “coming from IB”. Thats a good thing. Internships are good, and you’ve had relevant ones, you can usually frame them in many different ways. There are a number of paths you could try to pursue, but overall doing well in your stats/math classes, learning R and python, and being humble and motivated will get you interviews.
The energy industry is much less linear than other finance/IB/PE areas. Don’t be afraid to take a job at a company that interests you and you can learn the industry and get good mentorship just because “its not trading”. Desk analyst jobs can be few and far between. In my experience, most shops are just as interested if not more in someone with 1-4 years of industry experience than a new grad. And honestly having done 3-4 different roles in the industry, some jobs can be way more interesting than trading. Looking at it cynically, you could say you’re just staring at the weather forecasts 80% of the day.
I know this is old, but what support roles are interesting and worthwhile? I want to try and go IB to Commods and end up at a macro fund or somewort of market facing role
In a very similar position except I’m a new grad. Feel free to pm and we can pool resources
Just an observation, why does it seem like everyone on the trading forum talks about commodity trading? I'm just trying to get on a BB trading desk (not a huge fan of IB).
This forum is lagging indicator for the market, and commodity volatility and trading desk revenues have had a banner 24-month streak.
This.
What happens when that streak ends?
I grad college in 2005 and got into commodities in 2006.. at the time everyone wanted to work in real estate or investment banking.. no one cared about power or nat gas expect a few on here.... fast forward and the banks really start to hire again in the space... people start to look for a softer landing and say..houston.. i am smarter then those guys... we see a huge influx of talent and the trading desks of Texas A/M, UT and U of Houston grads start to see folks from the ivy league, stanford and tulane etc .... we head into a massive ramp up period and now firms are looking at talent from everywhere not just regional... then the market and regulations change and its not popular anymore... fast forward and it is again.... everything works in cycles it seems in commodities and we are back on top of the world... for now.... enjoy the ride and if you happen to grad at the start of another run up - bravo.... if not - investment banking is not a bad landing spot
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