The Buy Side - Hedge Funds and Pension Funds Jennifer Fraser Commodity Portfolio Manager Ridgefield Capital

My Background- Commodity Strategist and PM 2005-2009 - Ridgefield Capital Asset Management (Multi- commodity and basic materials equity hedge fund). 2002-2004 - Centaurus Energy (Natural Gas Hedge Fund- commodity only). 2001-2002 - Tudor Investments – Ospraie Funds (Multi- commodity and basic materials equity hedge fund). 1997 – 2001 - Enron Corporation. MBA (University of Toronto, 1997). MA - History (Université de Montréal, 1994). BSc - Microbiology and Immunology (McGill, 1990).

2005-2009 - Ridgefield Capital Asset Management (Multi- commodity and basic materials equity hedge fund).

2002-2004 - Centaurus Energy (Natural Gas Hedge Fund- commodity only).

2001-2002 - Tudor Investments – Ospraie Funds (Multi- commodity and basic materials equity hedge fund).

1997 – 2001 - Enron Corporation.

MBA (University of Toronto, 1997).

MA - History (Université de Montréal, 1994).

BSc - Microbiology and Immunology (McGill, 1990).

What does a PM do? They DO ideas: Generate investment ideas / themes then structure appropriate vehicle for the investment (fixed price, time spreads, options, swaptions, basis spreads, cross-commodity). They DON’T trade: Trading / execution is a utility function and trading team compensation reflects it. Trading desks execute shopping lists on the buy side. ( and it’s almost all electronic).

They DO ideas: Generate investment ideas / themes then structure appropriate vehicle for the investment (fixed price, time spreads, options, swaptions, basis spreads, cross-commodity).

They DON’T trade: Trading / execution is a utility function and trading team compensation reflects it. Trading desks execute shopping lists on the buy side. ( and it’s almost all electronic).

How did I get here: Ski Instructing/ Waitressing to Asset Management 1990 = RECESSION = no jobs - so you do what you need to do. Enron – The good things: largest natural gas marketer in North America – At one point owned 20% of pipeline capacity and moved 20% of natural gas – learned industry bottom up and did every grunt job there was. Fell on my face more times that I can count – but you have to get back up.

1990 = RECESSION = no jobs - so you do what you need to do.

Enron – The good things: largest natural gas marketer in North America – At one point owned 20% of pipeline capacity and moved 20% of natural gas – learned industry bottom up and did every grunt job there was.

Fell on my face more times that I can count – but you have to get back up.

Following the $$$: Pay Scale and Compensation Hedge funds: PM gets 10% - 30% of upside. i.e. 100$ mln AUM makes 25% or 25 mln$- PM collects 5$ mln = rewards short term performance. Pension Funds: Lower comp in the front years but increases over time = rewards long term performance. Analysts and associates make 85$K to 150 K$/yr – with bonus solely at discretion of PM. i.e I pay you out of my bonus pool. Analysts and associates typically cost money for 2-4 years – errors, learning curve and execution errors.

Hedge funds: PM gets 10% - 30% of upside. i.e. 100$ mln AUM makes 25% or 25 mln$- PM collects 5$ mln = rewards short term performance.

Pension Funds: Lower comp in the front years but increases over time = rewards long term performance.

Analysts and associates make 85$K to 150 K$/yr – with bonus solely at discretion of PM. i.e I pay you out of my bonus pool.

Analysts and associates typically cost money for 2-4 years – errors, learning curve and execution errors.

Getting in the door: Distinguish yourself in a particular industry / sector- anyone can do comps- not everyone can bring an idea and or insight to the table. Work for a specific basic resource company – XOM, CVX, TOT, ECA etc – Build a network in the industry not just a list of ibanking analysts and associates. Know your industry inside and out : production, transport, consumption, regulation, etc.

Distinguish yourself in a particular industry / sector- anyone can do comps- not everyone can bring an idea and or insight to the table.

Work for a specific basic resource company – XOM, CVX, TOT, ECA etc –

Build a network in the industry not just a list of ibanking analysts and associates.

Know your industry inside and out : production, transport, consumption, regulation, etc.

Random Events - Hurricanes Waves not wind do the damage- water is heavy. Storm damage is often underestimated. This is where knowing your pipes comes in handy. Proactive instead of reactive.

Waves not wind do the damage- water is heavy.

Storm damage is often underestimated.

This is where knowing your pipes comes in handy.

Proactive instead of reactive.

Getting Natural Gas and Crude Oil to Market

Gulf of Mexico – Nat Gas Infrastructure

ENB Gathering System: Direct Hit By Ike and Gustav IKE Gustav

GOM: Major Platforms

Hurricane Flooding: Knocks out Onshore Processing

Closing thoughts: Commodities vs Equities Pure play – no more guessing about management. There is no equity story without a commodity story – learn the industry from the inside. Get “your hands dirty” with actual product. Far too many equity analysts can’t find Cushing, OK or Erath, LA on a map.

Pure play – no more guessing about management.

There is no equity story without a commodity story – learn the industry from the inside.

Get “your hands dirty” with actual product.

Far too many equity analysts can’t find Cushing, OK or Erath, LA on a map.

Contact Info: Email: jenfraser1@gmail.com

Email: jenfraser1@gmail.com