Now that US banks have announced and are paying bonuses, the defections are likely to begin. One group of traders is particularly awash with options. Commodities traders can go to rival banks, or to hedge funds, or to commodities trading firms.
Ross Gregory, senior partner and head of commodities at New York-City based Proco Commodities, says that banks risk losing some of their best commodities traders in the coming months as funds and trading houses queue up to hire them. For many traders, moving out of a bank is a “no-brainer,” says Gregory: hedge funds and trading houses are expanding, and they award traders a far higher proportion of PnL in compensation.
If and when commodity traders do move, it will mark the continuation of a trend in evidence for a few years. Goldman Sachs’ top commodities trader, Anthony Dewell jolted the market when he quit for Millennium in October 2022, but he was simply following in the footsteps of people like Jay Rubenstein, the former global head of commodities trading at Morgan Stanley, who joined Citadel in December 2020.
Rubenstein has built out a commodities trading operation at Citadel and leads the fund’s energy marketing business, which is credited with generating some of Citadel’s record $16bn in profits. Joanna Welsh, Citadel’s chief risk officer, told Risk Magazine that the fund was considering the implications of a delay to Nord Stream 2 before the war in Ukraine broke out, and was presumably positioned accordingly.
It’s not just Citadel and Millennium. BlueCrest, the family office run by Mike Platt, has been building out its commodities business too. Last October, it hired Jay Radia, a trader who’d spent 17 years at Goldman Sachs, as its commodities COO. BlueCrest famously pays employees 30% of the profits they generate; in banks, awards are closer to 5%.
Gregory is optimistic that last year’s commodities hiring will continue as funds continue to push into the space. “All the big hedge funds are hiring associate portfolio managers and analysts,” he says. “It’s not like they’re hiring one commodities trader – they’re hiring vertically for entire teams across all the different commodities asset classes, from oil and gas, to energy and power, metals and mining and softs and agriculture.”
Photo by Tandem X Visuals on Unsplash
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