Soaring prices for all manner of raw materials gouged, pumped and pulled from the earth is pushing institutional money managers, hedge fund managers and investment strategists to reevaluate the role commodities play in their asset allocation models. It also means the managed futures industry is looking for talent.
While surging prices for oil and gold are grabbing headlines, prices are rising for other physical commodities like tin, copper, aluminum, silver and uranium. Then there are all of the financial futures instruments used to manage different aspects of portfolio risk.
What's it take to be successful in the commodities industry? The skills are going to vary from job to job, says Emanuel Balarie, chief market strategist for Wisdom Financial, a commodity trading firm in Newport Beach, Calif. A technically focused hedge fund that relies on computer-based trading models will covet people with quantitative skills and the ability to build those systems. Sales people need not have quant skills, but basic market knowledge is important, as is a long-term outlook. Traders will need to have experience, while analysts and strategists should possess either an MBA, a CFA or a similar designation.
"For breaking in at the ground level of a commodity trading firm, a bachelor's should be enough," Balarie says.
"The amount of money going into managed futures has more than tripled in the last three years, from $50 billion to $180 billion," observes Balarie. As a result, institutional clients are beginning to re-think their practice of prohibiting investing strategies that included commodities. Even the British government is considering adding a commodities component to its pension fund, Balarie says, and major Wall Street firms are thinking about including commodities in their recommended asset allocation models.