Investing.com -- Hedge funds are increasingly turning to weather experts to guide their commodities trading strategies. Alex Goldstein, a 35-year old who leads a team of data scientists and meteorologists at Millennium Management, is one of the many weather specialists sought-after by hedge funds and trading firms.
Commodities trading, especially for natural gas and agricultural commodities like coffee, cocoa, and grains, is significantly influenced by weather conditions. For instance, this year, record-breaking cold weather in the US caused a surge in natural gas futures, while fears of poor weather in Brazil, a major coffee producer, drove Arabica coffee futures to an all-time high.
Firms such as Squarepoint Capital, Jane Street, DV Trading, Millennium and Balyasny Asset Management have recently hired weather experts or are expanding their existing teams, Bloomberg reported, citing sources close to the matter.
The demand for weather experts in hedge funds has grown due to job cuts and budget uncertainties at federal science agencies. As a result, more weather scientists are seeking employment. This trend is expected to accelerate, according to private and public sector interviews.
In 2024, hedge funds hired 23% more weather experts, including data scientists and meteorologists, than the previous year, as per Proco Group, an executive search firm. The average compensation package also rose by 18%, with top talents earning between $750,000 and $1 million. This is significantly higher than the 2023 median salary of $93,000 for atmospheric scientists and meteorologists, as reported by the US Bureau of Labor Statistics.
Extreme weather events, which have caused more than $1.4 trillion in damage across the US since 2014, adjusted for inflation, have led to significant fluctuations in commodity prices. These fluctuations provide opportunities for hedge funds to profit.
Citadel, a multistrategy firm that managed about $66 billion as of Feb. 1, 2024, has been ahead of the curve in this area. It hired the head of weather-focused trading firm Cumulus in 2018, along with about 20 traders and analysts. Citadel now has about two dozen weather specialists who help support its commodities trades.
Millennium Management, another large multistrategy firm, also has a meteorology and weather team of five to ten people and is continuing to hire in this area. The team uses advanced methods, including AI and data analytics, to support commodity traders.
The ideal candidate for these hedge fund positions often has a doctorate, coding or Python skills, and the ability to work with traders. While hedge funds can offer high salaries for these skills, government and academia offer other benefits such as work-life balance and relative stability.
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