The number of poker players taking hedge fund jobs is increasing, reports Fins.com. More and more funds are looking for fast-thinking card players who can quickly analyze intricate situations and make cold, hard, calculated bets. The type of skills shown by top poker players mirror those needed in hedge fund trading jobs: namely, rational approaches toward risk and a good memory.
A good example would be superstar gas trader John Arnold, who’s made billions trading energy futures for his Houston-based Centaurus Energy fund, and was profiled recently by CNN’s Money. He is described as having the “brain of an economist… and the iron stomach of a riverboat gambler.”
Arnold began his career as an energy trader at Enron, but escaped before the firm imploded. A few years later he reportedly earned $1 billion betting that natural gas prices would fall – betting against the now famous wager at Amaranth Advisors LLC. In 2008, he foresaw the collapse of the commodities boom and doubled his firm’s money.
“He’s like a poker player who can see everyone else’s cards,” one longtime associate is quoted as saying in the article. Arnold focuses on a “virtual” type of natural gas trade known as a “swap.” No physical natural gas trades hands. But if big energy producers such as Chesapeake Energy or BP are worried that prices are going to fall below a certain threshold, they often enter into a contract with a firm such as Arnold’s Centaurus to pay an agreed amount of cash in the event of a price drop. However, if prices move the other way, Centaurus wins.
Arnold showed great aptitude for numbers early in life, able to easily grasp economic concepts and do complex math in his head. His early experiences at Enron gave him unique insight into the energy needs of gas customers around the country. He was handling contracts totaling more than $1 billion a day on Enron’s natural gas trading desk, when he was only in his mid-twenties. Today, his Centaurus fund, founded in 2002 with a few colleagues from Enron, has 70 employees.