The trend at really big physical traders has been moving up the supply chain into production, with the obvious example being Glencore. Are the people buying up assets at a place like Glencore or Noble former traders or are they brought in from say PE funds/miners for that express purpose?
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They are traders; I have not heard of people being brought in from PE shops. Besides, I don;t even know if PE guys would be that useful. They're looking to make a quick (leveraged) buck through capital gains. The glencore's of this world buy assets because of how they augment trade book, and because of the long term fundamentals. Physical trading shops have a very, very long term outlook.
Also, a very signifcant proportion of physical assets in a physical shop's balance sheet were not part of an acquisition strategy, but rather collateral posted by suppliers against pre-export finance (which they then ended up defaulting on).
Typically traders since they aren't really focused on flipping it quickly but rather trading around an asset/getting market intel.
Thanks guys.
A physical asset is the same thing as buying an option. You are purchasing it to either trade around it or setup a view based on something you think will happen. It has to do with usually short-term trades or hoping for volatility. Basically PE guys would have zero skills valueing these things. PE guys, bankers focus on the cost side of equation (balance sheet, business mode), and avoid any risk/loss from optimizing or not optimizing. Traders focus on optimizing when possible and the hope is you do not overpay for that option.
while i doubt it, i have to ask - would something like the CFA be beneficial in this regard?
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Disagree with you, I consider 12-18 months short-term btw.
Seems to me there is a decent amount of chartered accountants on the Asset Management side of big traders. It could just be that was the way of choice to break into trading in South Africa (Glasenberg, Davis, others…)
CFA, there is a couple chapters about valiung physical assets in the CFA but does not go into depth. CFA though seen valubable cause teaches a lot and shows work ethic, not an absolute needed.
CAs, art smart people who land in places, I would not read much into it. Again most trade shops with finance help to look at the impact to working capital and asset base, but truly the real value in the asset is looking at how to value extrinsic which CAs struggle with.
Most commodity trades are either time spreads, pair trades. Some of the toughest things to value. You need to focus on fundamental S/D views and forecasts, run probability analyses on certain things, run volatility curves but remember you are dealing with pairs so do not overvalue vol etc. All the banker/CA/finance dude can tell me is you are using too much working capital, too much asset base, costs too high etc...well if my extrinsic goes way above that do I really care about working capital? What is the probability I can capture extrinsic etc..
The traders at places like Glencore and Noble are typically people that have gone through the ranks from traffic to risk (or operations) to trading. I don't know of anyone being poached from a PE shop because the skills don't necessarily translate.
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