Hedge funds and proprietary trading firms are beefing up agricultural markets expertise by hiring traders as big swings in prices have made even relatively niche corners of commodities trading lucrative during the past year.
(Bloomberg) — Hedge funds and proprietary trading firms are beefing up agricultural markets expertise by hiring traders as big swings in prices have made even relatively niche corners of commodities trading lucrative during the past year.
Prominent moves include Squarepoint Capital LLP’s January hire of Olivier Paturaud from Louis Dreyfus Co., where he headed sugar trading in Asia, and Millennium Management’s hiring of soft commodities specialist Jonathan Kroft from Citadel late last year, according to people familiar with the changes. Marshall Wace brought on Neil Smaldon, who has an agriculture background, as the firm’s head of discretionary commodities.
Hedge funds have made a major comeback into commodities trading during the past year, with new entrants emerging as existing heavyweights made a series of hires to bolster their teams. Attracting and retaining the right talent has been a huge area of focus, with hedge funds offering massive signing bonuses to bring on expertise.
“It is evident that the pool of agriculture and softs traders is lighter versus energy, therefore hedge funds are having to be more competitive to attract the top traders,” said Ross Gregory, senior partner at executive search firm Proco Commodities.
Many of the hedge funds with strong energy trading operations are now looking to diversify into agriculture and softs commodities to maximize returns across a broader asset class, Gregory said. Demand from firms for agriculture, softs and metals traders is 65% higher than energy search mandates since the start of the year, he said.
Squarepoint still has at least two open positions — one commodity fundamentals trader and one commodity fundamentals analyst — on its website. The company didn’t respond to requests for comment. Millennium declined to comment.
Trading Houses
Commodities trading firms are also following the trend. Ocean Leonid Investments AG, a proprietary firm focused on trading energy, decided to start an agriculture desk to diversify, a person familiar with the matter said. The company hired Chris Bird, who was previously with ECTP, as a senior trader. He started in January. Swiss trader Ezpada AG hired Darren Bennett from Tate & Lyle Sugars to trade all commodities, including agriculture, at the firm’s new London office starting in April.
“Ezpada has been a major player in the European energy market for more than a decade and now is looking to expand further in the oil, metals and agricultural space,” Chief Trading Officer Andreas Schmalzbauer said in a Thursday statement.
Commodities are expected to return more than 31% over 12 months, and current prices provide “an attractive entry point” for energy, industrial and precious-metals investments, Goldman Sachs Group Inc. analysts said in a Feb. 20 note. Other firms like Citigroup Inc. have been less bullish, but wild swings in commodity prices have become all but the norm during the past year, particularly after Russia’s invasion of Ukraine.
While prices for crops such as wheat have fallen sharply from record highs triggered by the war in Ukraine, disrupted supply chains are expected to keep supplies tight and volatility elevated in the medium term. Rising capacity to make renewable diesel from vegetable oil and tallow has also increased demand for traders in those areas, while expectations of food inflation are also likely to create market distortions that could benefit specialist traders.
–With assistance from Michael Hirtzer.
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