All strategies mix good days and bumper years with bad days and market-lagging returns. For commodities traders in 2025, it was more of the latter.
Conflict in the Middle East caused volatility in oil prices. President Donald Trump’s tariff policies, and their uneven implementation, led to fluctuations in the prices of crops, such as soybeans. The growing use of data centers by artificial intelligence giants has changed the outlook for electricity demand so drastically that even top investors in the space are unsure what the future holds.
As a result, commodity traders trailed most other asset classes.
The average commodity hedge fund was up just 2.2% through November, according to hedge fund research firm PivotalPath, which is significantly below the overall industry average of 10.7%. Pierre Andurand’s eponymous fund, one of the most prominent commodities managers in the world, suffered huge losses on trades related to cocoa, Bloomberg reported, with drawdowns of more than 50% in the first half of the year.
Citadel, which has set itself apart from its multistrategy peers with its natural gas traders and overall commodities unit, has lagged its rivals in its flagship fund for most of the year, a rarity for the most profitable fund in industry history. Millennium’s commodities branch, led by former Goldman executive Anthony Dewell, lost several senior PMs this year, Business Insider previously reported, though the unit’s returns this year are unknown.
But it’s still an area where rivals are planning to expand, and where Citadel and Millennium continue to build up.
As assets swell at multistrategy firms, which typically have roots in quant, equities, or fixed-income trading, the need to expand into additional asset classes increases. Commodities trading, especially the trading of physical assets that require a buyer to actually receive, hold, and transport a good, was once reserved for specialist funds that competed with trading desks at big banks and energy houses like BP and Shell.
Now, “physical commodities will be the biggest diversification play in 2026 as both larger firms and start-ups hunt for alpha that quant approaches cannot easily access,” a report from industry data firm With Intelligence reads.
Steve Cohen has told backers of his Point72 that the firm may expand into commodities soon, several people familiar with the manager tell Business Insider. The firm declined to comment. Balyasny has offices in a Danish port city, where it trades physical commodities, and Jain Global had 13% of its risk allocated to commodity trades as of mid-year.
Verition has hired several energy-trading portfolio managers this year. London-based quant giant Qube’s first foray into the States was in Houston, an energy trading hub, and quant rival Squarepoint expanded into physical metals trading this year.
Even firms that are already major players, such as Citadel and Millennium, are increasing their exposure. Citadel bought German energy trader FlexPower and added senior traders in Australia this year, in addition to its 2024 purchase of Japanese power trader Energy Grid Corporation. The firm spent approximately $1 billion to acquire Paloma’s natural gas assets in the Haynesville Shale region, located in northern Louisiana and eastern Texas.
The company has since been renamed Apex Natural Gas and is fully owned by Ken Griffin’s firm. Apex earlier this month bought natural gas assets from the energy company run by billionaire Dallas Cowboys owner Jerry Jones, Bloomberg reported.
Millennium, meanwhile, is backing new commodities hedge funds based in Paris and Singapore as it continues to allocate to external teams.
“Multi-managers sell themselves as a dependable source of low-beta returns, and the inefficiency of commodities markets, particularly at this time, is seen as a great way to generate diversified alpha,” the With Intelligence report reads.
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