Macquarie Podcast Series featuring Commodities and Global Markets
Speakers: Benjamin Davis, with Valeria Stepantsova
Recorded on 25 June 2020.
Voiceover: Welcome to the Macquarie Podcast Series featuring Commodities and Global Markets.
Valeria: Hello, everyone. My name is Valeria Stepantsova, and I’m part of the EMEA oil team in London. I’m delighted to welcome you to the fourth episode in our Macquarie Podcast Series featuring Commodities and Global Markets. Today, I’m pleased to welcome Ben Davis, who heads the EMEA Oil team. Ben, thanks for joining us today. Can you start by telling us about your career and how you got to where you are?
Benjamin: Thanks, Valeria. So, I was starting my final year of university in 2008 and Lehman had just gone into bankruptcy, and the UK was about to enter recession, and I had no idea how I was going to get a job. I decided to make a list of every investment bank, boutique bank, accountancy firm, or even a major corporate who had a Graduate Programme, and started making my way through the list. Macquarie offered me a role on their Graduate Programme and 12 years later, I’m still here, having initially started in our gas and power business before moving to oil about six years ago.
Valeria: So, it looks like you joined Macquarie in very difficult times straight after the 2008 financial crisis. Could you perhaps share some tips to any incoming Analysts or Interns who will also be joining at a time of quite a lot of economic uncertainty?
Benjamin: Sure, Valeria. I would answer this question in two parts. And the first part is, as you are going through the process with your applications, let’s be honest, you are likely to get more rejections because corporates are likely to be hiring less people. So, the first thing I would say is do not get disheartened, apply to a larger breadth of places, and the key is not to get disheartened if you are to receive rejections. Because corporates are still hiring, Macquarie is definitely still hiring, and I’m aware of many other places that are too.
Valeria: That’s super interesting. So, before we talk about the EMEA oil team, I just want to find out a little bit more about you. So, you started in the grad team at Macquarie in 2009. What advice do you wish someone actually gave you at the start of your career?
Benjamin: I think, in the first two to three years of your career, the key is learning and versatility. I personally became too focused on the gas and power markets and missed out on looking out for other commodities, such as agricultural products or metals. Having a more 360 view of your industry helps you become a better salesperson. So, equip yourself. No question is a stupid question in your first year, or in any year, in fact. And you can never ask too many questions, especially in those first six months. I would say take on any task given to you, keep learning, and try to gain a deep understanding from as many different types of people as possible.
Valeria: So, if there was one decision you look back on and think, “Hmm, I’m glad I chose that path,” or one person who was influential in your career, and what was so special about them? Would you be able to talk through that?
Benjamin: Sure. I mean, probably the most difficult decision I have made in my career so far came after I chose to leave Macquarie for about a year. About three months after I started at another bank, I realised how my expectation versus the reality of the situation was very different. I had this image of the big American investment bank, big risk appetite, huge deals, and that really was not the case. Actually, in the commodity space, Macquarie is right at the top of the Premier League, and it took me leaving to truly realise and appreciate that. And Eric, my ex-boss at the time and now my current boss, asked if I would consider returning, albeit to a different job as the position I had left had already been filled. He offered me a role in the Oil team, which is actually quite a different product and different client base. Luckily, I had started to diversify my portfolio prior to leaving Macquarie and had brought on a few airline clients already. So, in a way, I had already created this opportunity for myself. When I decided to come back, I was nervous how I would perform in this different space, and of course, about the reception my colleagues would give me. But the challenge has been hugely rewarding and we’ve built a strong team with a franchise of over 90 clients, and I’m really proud of the work that we do.
Actually, Valeria, what about you? Why did you choose Macquarie and what’s the best advice that you’ve been given?
Valeria: So firstly, similar to the point you actually already raised, Macquarie is the best at what it does. So, I guess, that it only made sense to come and work in energy and in commodities at a leading firm. And secondly, I would say that Macquarie didn’t have this cut and paste, ‘play by the book’ culture that you see in quite a lot of top tier banks that give you not much room for being entrepreneurial, so I wanted to come in and learn a lot but also be given the opportunity to develop my own franchises or niches along the way, which is something Macquarie gives you.
And, in terms of the advice I wish someone had given me as a grad, I think it’s to focus more in differentiating yourself and nurturing a more well-rounded skillset rather than placing emphasis on skills that one typically associates with a banking career such as numerical and technical. So, I actually came from a politics background and have very creative hobbies so I underestimated how much I should have actually leveraged skills I already had, such as analytics, creativity, relationship building, which are actually much tougher to cultivate, rather than focusing on crunching numbers and formulas for my interviews. So, people actually often underestimate how much you will learn on the job versus what is required.
And lastly, of course, once you do get a job, I would say the best advice is try to be a sponge everywhere you go. Soak up the experience and advice you get along the way, and even if it feels less relevant at first, it will definitely pay dividends later.
Ben, back to you. What are your interests and passions outside of Macquarie?
Benjamin: Well, Tottenham Hotspurs. Well, I’m completely devoted to Tottenham and I go to almost every game, obviously in a non-COVID environment. It’s actually not always relaxing and often far from rewarding, but I’m addicted – not much I can do. I also love skiing, and I make sure I hit the slopes at least three times a year, either with my family or long weekends with friends. I’m also a keen, although very average, golfer. And my claim to fame here is winning the Macquarie Masters Golf Tournament in 2018.
Valeria: That sounds very impressive. Now, turning to the EMEA oil team. Can you give us a little snapshot of what the team actually does?
Benjamin: Sure. So my team and I look after the corporate counterparties who have direct exposure to the price of oil or any oil product, like jet fuel, gasoline, marine fuel, and the main clients are airlines, refineries, producers, large industrials, shippers, and we provide them with risk management products – the technical term being hedging. For example, an airline who has forward sold a ticket on a plane, between 20 and 30% of their cost is directly linked to the price of jet fuel. And if fuel prices rise, the profit margin on that flight that they may have sold you in nine months’ time could be completely wiped out. So, using a combination of swaps, futures and options, we provide them with a financial product that compensates them were this to happen. And, in a typical day, we’re speaking to clients, updating them on developments in the oil market, pricing up products that can assist them to manage their price exposure, and under normal circumstances we would also be travelling at least two to three times a month, attending conferences or visiting either prospective or existing clients.
Valeria: It sounds like a great crash course in hedging. So, airlines are probably the most high-profile clients that we deal with, but I know that we support quite a lot of different, diverse companies across the sector. Can you share some of the different clients we work with and the support that we provide them?
Benjamin: Sure. So, for example, a producer in the North Sea. I mean, they are the most directly impacted by any movements in the price of oil given that their revenues are pretty much 100% correlated, as typically that is all they are selling. Most oil companies would have had to take a loan to develop an oil field and will have both interest and capital payments to meet. And their ability to service this debt, as in make payments that they owe, will depend on the revenues that they receive, and therefore clearly the price of oil; if the price of oil drops, they may not be able to meet their obligations. So, they need a product that will compensate them if this were to happen as it has done over the last two to three months. We structure and price these sorts of derivatives to ensure that the client is protected in case of an adverse move in the market. And we do the same for refineries who are affected by the margin on the oil products they produce and obviously for consumers who are likely to be adversely affected if oil prices were to rally.
Valeria: Understood, understood. So, we’ll come to the impact of COVID-19 shortly, and the impact it’s had on the industry. But, in the past year alone, we saw quite a lot of tensions between Iran and the US, then the Russia / Saudi Arabia oil price war; how do you actually stay on top of that volatility, and does it make long-term planning as a team quite difficult?
Benjamin: It does make it difficult, but in effect, we like volatility. It means that we have something to talk about when our clients call, it encourages them to protect themselves and, obviously, do deals with us. And at Macquarie, we have some of the highest rated oil analysts and fantastic research, and we just have to make sure we are always up-to-date so that clients feel comfortable coming to us when they want to know what is happening and what is likely to happen. And now, the situation with the US, Iran, Saudi Arabia, have made the last 10 months the most interesting and challenging in my career. In terms of planning, we just need to make sure we have strong relationships across all the sectors in the oil market as there are likely to be some more effective than others at any one point. It also challenges us to come up with new ideas and products that best suit the different clients as these different markets evolve.
Valeria: That’s true. So speaking of markets evolving, the energy industry is actually changing with the move to renewables and the fundamental shift in the energy landscape in North America. How do you see the long-term future, and what challenges and opportunities do you think this actually provides for your team?
Benjamin: Listen, there clearly has been a shift towards renewable energy over the past 10 years, and with the purchase of the Green Investment Group in 2017 from the UK government, Macquarie is clearly at the forefront of this change. However, I believe there will still be a big need for fossil fuels for the foreseeable future. Airlines, once they are hopefully flying again relatively soon, will need to purchase jet fuel, and shippers will need to purchase marine fuel, and trucking companies will need to purchase diesel. Our challenge is to find the new products to assist these clients – for example, carbon permits for those needing to offset emissions or new assets they may be exposed to like biodiesel or biojet fuel as these markets open up.
Valeria: Interesting. Some very good points. I propose now we turn to one of the most prominent topics, COVID-19. So, what challenges have the business and your clients faced, and have there been any opportunities?
Benjamin: Well, our clients are airlines, oil producers and refineries, so pretty much all of those hardest hit by the COVID crisis. I think that the key has been to see how we can assist these clients by restructuring deals we have done in the past or proposing new deals that provide immediate protection from any adverse market moves. At the same time, the clients are busy dealing with the adverse effects of COVID and don’t have time to speak to the whole market. They know that, at Macquarie, we will work very hard to get deals on the table and approved fast, so in fact, many have turned to us during the crisis and many of our relationships, I believe, have actually become stronger, and riding out a crisis together definitely reinforces that bond.
Valeria: That’s true, they must be definitely grateful for the relationship. Would you be able to describe what your typical day looks like now that we’re in this crisis together?
Benjamin: Sure. Well, my day usually starts when my son wakes me up demanding I switch on the television to watch his new favourite show called Number Blocks. It’s a show that’s actually about numbers, so clearly he is a banker in the making.
Valeria: Very convenient.
Benjamin: Yeah. And then I typically do some sort of workout, either with a trainer over Facetime or a random Joe Wicks 20-minute HIIT session, and I then sit down at my makeshift desk in our guest room at usually around 8am. And I start by updating myself on the latest market developments, catching up with my team on our daily call at 9.30am. And then we go into client mode, updating pricing to clients on deals we’re working on, making calls to clients informing them on the general market and catching up also with the onboarding team that we have at Macquarie to ensure that we have all the documents in place we need for any new clients that we’re dealing with. I think the goal is then, hopefully, to make at least a couple of deals in that time too. I think having the structure has helped me keep a sense of normality during the lockdown. So, every day I have lunch with my wife and son before he started school a couple of weeks ago, between around 12.15pm and 1pm, and that has been a non-negotiable for me, and I’ve loved it. The afternoon is usually pretty intense. We’re trying to execute deals once the US market opens, usually until around 4pm when things calm down. And that’s when I work on providing management with an update of business performance and try to catch up with the support teams to make sure that the deals we’re working on continue to be approved. At around 7pm is usually my son’s bath time and most of my work is usually done by then. And then my wife and I have dinner probably around 8pm before watching some TV – clearly Tiger King has been completed – or often we’ll have Zoom catch-ups with friends.
What about you, Valeria? I mean, is that similar to what you’ve experienced? How does your typical day look like?
Valeria: So, my day starts with obligatory exercise. I side with you on the fact that structure is key, and so I find that the mornings is the only time that I could get some quiet before the market buzz begins. So, I also do a HIIT session or go for an early run by the sea – I’m actually currently quarantining by the UK seaside which isn’t so bad. I usually also get to my home desk around 8am, catch up on some early market news, update clients on any major price moves, and aim to close several deals by lunchtime. Typically, there's also at least one client or internal call per day. I also try to carve out at least 45 minutes to have lunch or Facetime my family that’s still back in Russia. But even remotely, during lunchtime, our team still makes sure there’s still someone at the desk to cover any client requests as we try to stay in touch with every client during these uncertain times, even if their activity is maybe somewhat different to before. Then, when the market quiet things down, which is usually closer to 5pm and you can actually focus without market distractions, I work on some longer-term projects such as onboarding new clients, drafting credit proposals or pitching new ideas to clients. But what I wanted to ask was, as we start to emerge from the crisis, do you think there will be any permanent changes to the industry, and what challenges do you reckon clients will face as they start to recover?
Benjamin: Valeria, I think one positive we’ve seen from the crisis is that we can successfully work from home, at least in the medium term. That is actually going to be a game changer for flexible working going forward, especially for people who have people at home to care for. Business-wise, we have seen extreme volatility and I think that’s going to make clients more mindful of protecting themselves in the future. I do though expect in the short term, clients will be nervous about taking long-term decisions given the uncertainty, so I think that deals will be much shorter term in nature.
Valeria: And how have you found working from home for such a prolonged period of time? It’s been, what, more than three months? Do you think the pandemic will change attitudes to remote working going forward?
Benjamin: Definitely. Actually, it has so far been virtually seamless, and I will be encouraging my team to work from home one day a week. I do believe it is hard to grow a business without face-to-face contact, so this is certainly not the death of the office, but we have shown we can be very productive working from home. That’s not to say working from home hasn’t had its challenges. One example: a couple of weeks ago, my four-year-old burst into my office as I was on a call to an airline treasurer and did a massive burp into my headset trying to get a laugh out of me. Luckily, this was a relaxed client and he was very understanding.
Valeria: I’m sure anyone would be in exceptional circumstances.
Benjamin: I think we’ve all experienced that where, you know, children burst in either on a Webex or on a voice call. So, I’m certainly not the only person that has had that experience. Valeria, how have you found working from home remotely for such a prolonged period?
Valeria: So, I stand with you on this. It has actually been practically seamless for all of us. It’s funny because before the pandemic started, I think no one, virtually no one in a sales or trading or any sort of markets job would even be able to conceptualise the idea of performing the same level of work, of efficiency, but from home. But now look at us. So, on our side, activity, if anything, has picked up. So, I think there are actually more silver linings here. So, I expect actually a lot more flexible working in the future, even in the more traditional workplaces like banks.
Ben, how would you sum up the next 12 months for the oil sector and our team?
Benjamin: Well, very challenging, but still with huge opportunities. I think, clients are going to rely on us to help them and I believe that those that we assist will forever be grateful that we stood by them in a time of crisis.
Valeria: And, finally, for our graduates and interns who might be listening, why should they choose Macquarie and in particular, Commodities and Global Markets?
Benjamin: Well, you know I’m biased, I’ve been here for 12 years and I started here on the Graduate Programme myself, but I can definitely say that Macquarie is a fantastic place for people who like responsibility and are hungry to learn. The culture is genuinely special, and the bank lives by its motto of opportunity with accountability. I think, the flat structure gives young people opportunities to develop fast, and Macquarie expects you to be a self-starter and to take initiative. It’s a place for people with an entrepreneurial attitude, I believe. Certainly in the commodity space, we are recognised as the best in class and regularly win awards for the work that we do.
What about you, Valeria? I mean, you’ve been at Macquarie now for four years, what do you enjoy most about working here?
Valeria: So, I think if I had to choose one key aspect that differentiates Macquarie, it’s the concept of opportunity that you already mentioned. So very few large corporates out there provide young starters with opportunities to take on a chunk of responsibility at the very start. I mean, you are, of course, guided along the way, but you likewise have a chance to plough your own furrow. I can give you examples, two personal examples. So, I actually started my career in equity research covering renewable energy at Macquarie, and within a year I was given the opportunity to not only co-author a new client initiation report, which is quite a big deal on that industry, but also to chair a panel at Macquarie’s annual alternative energy conference where I got to interview heads of business of several of Europe’s top solar and wind energy companies. So when I moved to CGM to work with yourself in the energy team, I was quickly given the chance to bring in business and develop a relationship with a large European airline, and it was very rewarding when the efforts paid off, and we signed a significant jet derivatives deal with the client really shortly after. So, besides giving credit to yourself, to Ben, for being a great boss and teacher, I think this is also representative of Commodities and Global Markets’ wider culture. So Ben, thank you for that insight into your career and a little snapshot of the EMEA oil team. For those listening, thank you for joining today’s podcast. I hope it has provided some inspiration as you consider your own careers. And, we look forward to welcoming you to the next episode in the podcast series next month.
Voiceover: Thank you for listening to the Macquarie Podcast Series.
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