Commodities may have cooled off for hedge funds, but for banks, they’re, well, still a hot commodity. It seems every major bank Citigroup, Lehman Brothers and Deutsche Bank, to name a few, is pumping up the volume of their energy staff. Citigroup, for example, last month reportedly said it’s adding 400 people to its energy-related operations, while Deutsche Bank, long a commodities participant, has increased its U.S. power and gas trading team fivefold in a year. It’s not just energy getting the attention. Several banks are testing their metal: Bank of America, RBC Capital Markets, Bear Stearns, Credit Suisse (Europe) and UBS have all jumped aboard the London Metal Exchange in the past year. There’s still a lot of confidence in the role of commodities as an alternative asset class, Deutsche Bank’s Michael Lewis, who heads commodities research, told Reuters. We feel the asset class is gaining credibility. And resilience. Despite Amaranth Advisors stunning losses, crude oil dropping by nearly a quarter, and even gold losing 20% of its shine, most of the financial world except for hedge funds that invested in them was unaffected. We’ve just had one of the largest hedge fund collapses in history, Lewis said, but what’s been quite impressive over the past few weeks is that there’s been surprisingly little contagion effect. Market watchers are predicting that emerging countries will be center of growth for years to come and their appetite for commodities will grow, Olivier Jacob, an analyst at Petromatrix said in a Reuters interview.
