Faheem Osman – Commodity QIS: An Under-Appreciated Source of Systematic Returns? (S7E29)

In this episode of Flirting with Models, Corey Hofstein sits down with Fahim Osman, Managing Director and Global Head of QIS Structuring at Macquarie Group, to explore the underappreciated potential of commodity-based quantitative investment strategies (QIS). Osman, with nearly two decades of experience in investment banking and commodity markets, argues that commodities offer one of the richest and most durable sources of systematic returns due to their unique physical supply chains, structural frictions, and persistent hedging flows from producers and consumers. He highlights two key strategies—curve carry and index congestion—as particularly consistent over decades, with minimal negative years, and explains why these premiums resist arbitrage: they stem from non-return-seeking participants (hedgers, index roll schedules) whose behavior is repeatable and structurally embedded. The conversation also delves into commodity volatility selling, the shift toward weekly options, and the implications of zero DTE options, emphasizing how dynamic risk management, tenor selection, and microstructure awareness preserve the volatility risk premium. Osman stresses the importance of robustness over overfitting, client customization, and the evolving role of banks as solution providers rather than product distributors. The episode closes with Osman sharing his personal obsession with optimizing health through small, incremental improvements in exercise, nutrition, and supplementation, inspired by the book 'Outlive'.