Training the next generation of hedge fund recruiters at Paragon Alpha.
Each card has a question (top, dark) and an answer (bottom, white). Read the question first, try to answer it yourself, then flip to the answer. The "Why this matters for your desk" line at the bottom tells you exactly how this connects to the candidates and clients you'll be speaking with every day.
A fund that makes money by trading physical goods - oil, gas, gold, copper, wheat - or financial contracts linked to those goods (futures, options, swaps).
Some funds just trade on screens (financial). Others actually buy and ship the physical stuff. The biggest trend right now: funds doing both.
A narrow waterway between Iran and Oman. 25% of the world's oil and 20% of all LNG (liquefied natural gas) passes through it every day.
If it closes, a quarter of the world's oil disappears overnight. That's exactly what happened in February 2026 when Iran blocked it after US/Israeli air strikes. Oil doubled in price within weeks.
Brent = the global oil price benchmark. Traded in London. Used to price most of the world's oil.
WTI (West Texas Intermediate) = the US oil price benchmark. Traded in New York.
When the Strait of Hormuz closed, Brent spiked way more than WTI because Hormuz affects international oil supply, not US domestic supply. The gap between them hit $25/barrel - a 5-year record.
Funds that were already "long" oil (betting it would go up). In Q1 2026:
- Andurand Capital: +31% in one quarter
- RCMA Capital: +20% YTD
- Saber Capital: +12% YTD
Also winners: oil companies, tanker companies, and anyone producing energy in the US (cheap domestic gas while the rest of the world pays 7x more).
Funds that were "short" oil (betting it would fall) or weren't positioned for the shock. In Q1 2026:
- PIMCO Commodity Alpha: -26% YTD
- Millennium: -$1.5B in one week
- Citadel: -$1B from macro books
- Balyasny: -3.8% (worst quarter ever)
Big multi-strategy platforms got hurt because their risk systems forced everyone to sell at the same time.
Gold is the "safe haven" - when the world gets scary, people buy gold. Three things drove it in 2026:
1. War in Iran = geopolitical fear
2. Central banks (China, India, etc.) buying record amounts
3. US government debt making people question the dollar
Goldman Sachs targets $5,400 by year-end. JP Morgan says $6,300.
US natural gas costs $2.80. In Asia, the same gas costs $19.49. That's a 7x price difference.
Why? The US has loads of gas (shale boom). Asia lost its supply when the Strait of Hormuz closed. So traders buy cheap US gas, ship it as LNG to Asia, and pocket the massive spread.
This arbitrage is being called "the trade of 2026."
Traditionally, hedge funds trade paper - futures contracts, options, swaps. They never touch the actual oil or metal.
"Going physical" means actually buying, storing, and shipping the real commodity. Citadel bought gas wells. Squarepoint ships metals across oceans. Jane Street is entering physical gas.
Why? Because the Hormuz crisis showed that physical market access = better information = better trades. You can't get that edge from a screen.
On April 6, 2026, the US imposed 50% import duties on steel, aluminium, and copper. Russian aluminium faces 200% tariffs.
This means: imported metals cost way more in the US. US metal producers benefit (less competition). Global metal flows get disrupted. Traders who understand these flows make money.
Copper hit an all-time high above $14,000/tonne earlier this year.
The most famous commodity hedge fund manager in the world. Runs Andurand Capital from London. Known for massive, concentrated oil bets.
2025: Lost 40%. Got crushed.
Q1 2026: Gained 31%. Massive comeback on Iran oil bets.
April 2026: Lost 19% again on tariff fears.
He's the poster child for high-conviction commodity trading - huge wins, huge losses.
Millennium is the world's biggest multi-manager hedge fund (~$80B). Its commodity arm made $500M+ in 2024. But senior traders are leaving to start their own funds:
- Echion Capital ($1.5B) - Chaitanya Mehra
- Moreton Capital ($1B) - Les Finemore
- Nexus Commodities ($1B+) - Xiao Qin
- Crucible Commodities ($300M) - Scott Harbert
Ironically, Millennium is backing most of these launches with its own capital.
Point72 is Steve Cohen's $35.8B hedge fund. It was the last major multi-strategy platform without a commodity desk.
In February 2026, they hired Ryan Sheffler from Castleton Commodities as their first natural gas PM. Cohen flagged commodities as the firm's next big expansion at his December 2025 investor day.
They're considering opening a Houston office - that's where the energy trading talent lives.
Portfolio Manager (PM): Makes the trading decisions. The most senior and highest paid. "I run an oil book."
Trader: Executes trades. Manages positions day-to-day.
Analyst/Researcher: Builds the models and research that inform the PM's decisions.
Quant: Builds systematic/algorithmic trading strategies.
Scheduler/Ops: Manages physical delivery logistics (new and growing fast).
Houston: The capital of energy trading. Natural gas, oil, refined products. Point72, QRT, Verition, Citadel all opening offices here.
London: Global hub. Oil, metals, European power and gas. Most of our clients.
Geneva: Physical commodity trading capital. Where Crucible Commodities launched.
Singapore: Asian hub. Where Nexus Commodities ($1B) is based.
New York: Multi-strat platforms and financial commodity trading.
When you're speaking with a commodity PM, you should be able to say things like:
"With the Hormuz situation and the LNG arb being what it is, I imagine the gas desk is pretty active right now - are you looking to add?"
"I saw Verition built out a 10-person energy team last year. Is that creating any flow on your side?"
"Given the move to physical, are you finding it harder to source people with both financial and physical experience?"
Next step: Read the full Alpha Watch Tower - Commodities Edition for the complete picture. These flashcards are your quick-reference summary. The Watchtower gives you the depth to have real conversations with commodity traders and CIOs.
These flashcards are part of the AlphaACADEMY training programme at Paragon Alpha. The more you understand about how hedge funds trade and what drives their hiring, the better recruiter you become.
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