Energy trading firms and hedge funds with an energy focus are not exactly on a hiring spree. That’s no surprise given the overall market environment, less than stellar returns and increased regulator scrutiny. A few of the big names have closed operations, including Houston-based mega energy hedge fund Centaurus Advisors in May, as natural gas prices bottomed out. With more folks looking for a new place to land, the competition for the few and far between spots is sure to rise.
“With lots of talented traders on the street, it certainly inhibits the B student,” says Chris Melillo, managing partner and energy practice leader for executive search firm Kaye/Bassman International.
But even with the news of Centaurus Advisors and others choosing to shutter operations, there are expectations that the industry will rebound, given the continued interest in the safe harbor that commodities provide. And, for now, Melillo tells eFinancialCareers that most of the people at the banks are doing fine enough, so “no one’s in trouble.”
Competition the Big Issue
Competition remains the big issue, with the small number of open positions out there.
“There’s certainly a slowdown right now in hiring,” confirms Rick Gold, partner at First Call Associates, a recruiting services firm specializing in energy trading and marketing, carbon emissions trading, weather hedging and renewables investing.
In an interview with eFinancialCareers, Gold does note one spot of good news. He adds that energy trading is a much more “resilient” space than many other sectors of trading. There is spotty hiring, and most of it is concentrated in Houston.
Newbies of Interest
Entry-level positions are slowly beginning to open up in Houston, but primarily working for the oil and gas industry. According to Gold, oil and gas firms in Houston, like BP and ConocoPhillips, are primarily recruiting local talent. An undergrad with a great GPA from a good Texas university, like Rice University or Texas A&M, will likely be luckier applying for a spot there than someone from outside the area. But trading on behalf of an oil company is a much different world than working for an energy trading firm or energy-focused hedge fund.
Oil Company vs. Hedge Fund/Trading Firm
When you work for an oil or petroleum company, you’re trading physical oil, generally speaking, versus those on the finance side of it who are prop trading or speculating, for the most part. Plus, the comp and bonus at an oil company is considerably less than for those working for a trading firm or hedge fund. On the other hand, there is much less turnover for people in a trading division at an oil company. If you’re working for an oil or petroleum company, you need industry, pricing, risk assessment and transaction structuring knowledge, as well as a finance or engineering background. Someone working for an energy trading firm or working as an analyst or portfolio manager for a hedge fund needs a quant background, as well as financial modeling and risk management skills.
Look to Houston
For seasoned vets and proven producers who’ve worked for an energy-focused hedge fund or an energy trading firm, the best opportunities to move up the ladder currently are in Houston where the base of the energy industry exists. While it’s not easy for someone with minimal industry experience to score a spot at an energy trading firm or energy-focused hedge fund, there is certainly less of a barrier to entry for a young person in Houston than getting onto Wall Street, says Gold. But look to the smaller shops for internship opportunities.
Changing Fields: Look Elsewhere
Experienced traders without energy experience looking to segue into the sector needn’t apply, given competition and recruiter preferences. Gold notes that there’s been a trend of industry vets—traders with a direct background in energy trading—leaving the investment banking world behind and heading to the large specialized energy trading firms. Plus, recruiters simply aren’t interesting in sector changers.
“I see people wanting to transfer from equities or fixed income to energy. You usually don’t have a chance unless you’re connected to someone at an energy trading firm, and then you might get a shot on a desk. Recruiters are paid lots of money from the client to find a target and not a project,” says Gold.