US
Investment banks’ commodities desks are likely to be trimmed, but not decimated, in the coming months as part of global redundancy announcements.
BarCap has taken the decision to lay off its star commodities prop trader Todd Edgar, along with around a dozen of his colleagues. They plan to set up a hedge fund by the end of the year.
The bank not alone in paring back its commodities desk – both Credit Suisse and Bank of America are believed to have done the same in recent weeks.
But BarCap’s move is more about slimming the wage bill – Edgar’s team were supposedly offered a deal worth 30m over two years – as well as the Dodd-Frank-driven crackdown on prop trading, than an ominous sign that banks are cutting their commodities desks.
Generally, banks have been losing their traders to physical commodities houses in recent months. But prop traders, in particular, are moving on to pastures new. J. P. Morgan, for instance, lost Tim Jones, its head of prop trading, to metals focused hedge fund Tamarisk Fund.
“Prop traders on investment banks’ commodities teams are moving to hedge funds, funds of funds or to markets where they can escape heavy-handed regulation,” says one head of a commodity search firm who declined to be named.
Outside of the prop trading desks, however, the situation isn’t that bad. Research by analytics firm Coalition (cited by Financial News) shows that the major investment banks’ commodities divisions revenues were up by around 25% in the first half compared to the same period in 2010, despite some slow down in the second quarter.
Recruiters don’t expect commodities desks to be entirely sheltered from redundancies, but are anticipating any cuts to be minimal.
Greg Beszant, head of commodities at Selby Jennings, says: “Some investment banks are likely to restructure their commodities trading teams, but others still have a lot of replacement hiring to do. We’re also seeing more recruitment away from the traditional gas and power sectors and more banks expanding in steel and freight.”
Citigroup, for instance, lost a number of senior commodities bankers in London last year, and has been hiring throughout 2011, according to recruiters. Goldman Sachs, Deutsche Bank and J.P. Morgan all have current vacancies, suggest headhunters.
All have “current” vacancies which are almost certainly for hiring next year. Please be more specific, cash to hire this year is very minimal and also given the recent turbulence of reporting revenues from banks hiring for next year is uncertain at best.