As agricultural commodities continue to be affected by market volatility and geopolitical instability, HC Group’s Agriculture practice explores how this is affecting energy trading houses and the demand for proprietary agriculture traders.
Since 2022, HC Group’s Agriculture practice has seen the repercussions of deeply disruptive trends on the demand for proprietary agriculture trading hires. The consequences for existing incumbents and the hiring outlook for 2023 are far-reaching.
Persisting geopolitical instability and market volatility along with strong returns for many agricultural traders have encouraged energy trading houses and hedge funds to hire proprietary agricultural traders to expand and diversify their commodity platforms with new revenue streams.
Who was hiring?
Energy trading houses such as Gunvor, Hartree Partners and Vitol all recruited new agricultural trading talent to their trading platforms. Existing hedge funds such as Citadel and Millennium expanded their teams, while newer entrants such as LMR Partners, Qube, and Squarepoint have entered the market.
What does this mean for existing incumbents?
The current hiring environment has placed increased pressure on physical trading houses from external players to retain their strongest proprietary trading talent. The past couple of years have seen opportunities for bonuses at physical agricultural trading houses typically maxed out. But hedge funds and energy trading houses have been offering a more aggressive bonus structure and are ready to pay a high price to attract the strongest performing talent.
A lack of internal opportunities to advance careers via succession planning is another reason why we are seeing trading talent leave. Trading leaders are increasingly being offered the autonomy to hire the personnel they have worked effectively with in the past.
While physical trading houses expect a certain amount of talent attrition, HC Group has spoken with individuals who have reported increased levels of VAR and risk for proprietary trading activity.
How do you hire talent successfully for the proprietary space?
Those in charge of hiring decisions for a company are increasingly inclined to hire talent based on a track record of independence – the independence of having traded without a physical asset structure and of doing their own research and shaping their own pricing models. Many companies seek out talent who, even coming from a physical company trader, has over time reduced their dependence on physical assets and the offset it gives them. Companies are also seeking traders with exceptional risk management experience during highly volatile periods.
When thinking about the hiring outlook for 2023, Alex Coghlan, Director Agriculture at HC Group comments: “As hedge funds gain greater exposure to the commodities markets, HC Group expects demand for agricultural proprietary trading talent to remain high with energy trading houses continuing to evaluate opportunities to diversify their revenue stream into new product lines.”
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