June 17 (Bloomberg) -- UBS AG, Switzerland’s largest bank, is slowing down its commodities hiring expansion after a decade- long bull market drove up pay and created a scarcity of talent.
The Zurich-based bank hired 15 people for commodities this year and for now won’t pursue another 15 positions planned for 2011, Jean Bourlot, the global head of commodities, said in an interview in London. UBS originally wanted to double its commodities staff to 60, he said.
“There is no way we are going to go on a hiring spree,” Bourlot said. “I don’t think that talent pool is that big. People that are good are really expensive. And we want to protect UBS shareholder value by not compromising.”
Pay for the most-profitable metals traders rose 20 percent to $2 million to $3 million last year, according to Commodity Search Partners Ltd. The Standard & Poor’s GSCI index of 24 raw materials rose fourfold since the end of 2001 as farmers, miners and oil producers failed to keep up with demand. The surge drove commodity investments to a record $451 billion in April, about 50 percent more than a year earlier, Barclays Capital estimates.
UBS, which announced its commodity hiring plans in December, has no ambitions to rival New York-based Goldman Sachs Group Inc. or Morgan Stanley in raw materials, Bourlot said. Morgan Stanley owns the world’s largest brokerage and Goldman is the top firm providing over-the-counter derivatives to investors.
“We will never be a Goldman Sachs or Morgan Stanley for a few reasons,” Bourlot, 38, said in an interview on June 14 in London. “One is cost of entry. We live in the world where resources are scarce and this includes balance sheet and headcount.”
Bourlot, the former head of agricultural trading at Morgan Stanley, started at UBS in August. UBS hired Dylan Morgan, formerly of Goldman Sachs, to run industrial metals and Taha Quertani, from Tudor Investment Corp., to manage agriculture last year.
Eleven commodity staff were added in London, including Marco Saracino, a coal trader from Barclays Capital, Bourlot said. The bank also hired a head of oil marketing in Singapore and three people in the U.S. for natural gas and oil.
UBS, which employs about 65,000 people worldwide, said in December it will handle trading in agriculture, industrial metals and oil and gas for clients. It will also trade energy derivatives and continue to operate commodity indexes and a precious-metals business.
“I need to see how our flow franchise works out, but I’m not against expansion if we are profitable and disciplined,” Bourlot said. Flow trading describes the short-term purchase or sale of products on behalf of a client without the intention of holding the product or assuming a risk position.
UBS announced plans to withdraw from most commodities businesses in October 2008 and agreed to sell its industrial metals, oil and U.S. power and gas units to Barclays Plc three months later. UBS sought to cut investment banking risk after $48.6 billion in writedowns and losses.
Funds are under-investing in agriculture now, and the sector is “not understood enough,” Bourlot said. Crop yield limitations, weather disruptions, low inventories and rising demand make grains an attractive investment, he said.
Bourlot is bearish on sugar because of surplus supply and bullish on natural gas because it will be “a product of choice as the world de-nuclearizes and de-carbonizes itself.”
--Editors: Claudia Carpenter, John Deane
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