Recruitment battle for commodity traders

December 24, 2007 2:10 AM ET
Financial Times

Banks are pulling commodities traders out of retirement and doubling their salary guarantees as they fight for business in one of the few booming areas in Wall Street and the City of London.

The hiring spree comes after the S&P GSCI, the most popular commodity index, surged this year by almost 29 per cent - its largest jump in five years - thanks to a leap in raw materials prices such as oil, wheat or gold.

Options Group, the New York-based executive search firm, is predicting that 350 new commodity hires could be made in the first half of 2008, up 17 per cent from the same period in 2007.

The recruiting battle comes as banks are growing their commodities business from traditional areas, such as oil, gas and metals derivatives, into agriculture, emissions, shipping, forestry and physical trading.

So far this year, a record 550 commodity traders have been hired, with banks taking about 365 new traders. Some banks are offering traders incentive payments of up to 17 per cent of their own profit and loss to entice them or retain them onboard.

Roger Jones, co-head of commodities at Barclays Capital in London, said: "Investors are increasingly looking at commodities as an asset class while companies continue to need risk management. We expect this trend to continue into 2008."

Damian Goodburn of the Options Group said that staff supply is becoming tighter as new markets develop, forcing banks to take on "people with a less than obvious skill-set, especially in emerging markets".

Due to the scarcity of talent in the Asia region, senior traders in commodity hubs such as Singapore may receive pay packages 25 to 30 per cent higher than last year.

However, Wall Street banks are likely to keep overall salaries capped in London and New York due to their losses related to the credit squeeze, according to commodities bankers. They added that their main concern is now to avoid desertions to competitors.

"Commodities are not an island inside the banks, and staff bonuses are set to suffer," said the head of commodities at a large bank in London. "There are going to be a lot of disappointed traders - and that creates a hiring opportunity," he added.

The lack of traders and high salaries are particularly acute for physical trading, where commodities are dealt with directly.

Matthieu Prieuret, of capital markets consultants Smart, said: "Valuable physical traders in London are a scarce resource."

Copyright 2007 Financial Times