Commodities Trading

Commodities Trading

Commodities Traders Leave Banks to Start Hedge Funds

Many banks are making cuts either to meet new compliance and regulation requirements or simply to eek out a profit at a tough time for the sector.  For many commodities traders this has meant redundancies or even eliminating the entire commodities group for the bank.  Some traders have responded by forming their own hedge funds.  Are they sorry to leave banking behind?  According to one new hedge fund manager, "I can't say there's anything I miss about banking. I have more freedom."
Traders in energy, metals and agriculture are opening or joining hedge funds after leaving financial firms that cut more than 233,000 jobs this year, data compiled by Bloomberg show. Departures of commodity traders from banks probably rose 10 percent this year, according to Commodity Search Partners Ltd., a Brighton, England-based recruiter. Pay for that group will drop 24 percent on average, estimates Options Group, a New York- based recruitment firm.

Financial firms are losing people as U.S. and European regulators seek to limit holdings across raw materials and ban so-called proprietary trading that uses shareholders' cash. Slowing economic growth and Europe's deepening debt crisis may crimp earnings and limit compensation for traders.

“Banks are particularly vulnerable at the moment to losing people,” said Peter Henry, New York-based head of front-office search at Commodity Search Partners, which recruits about 40 commodity traders each year. “Increasing regulations are forcing banks to defer more pay in stock as opposed to cash as well as constraining the traders' ability to trade.”  source

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