The year 2025 has not favored commodities hedge funds, as they faced a challenging environment that resulted in returns lagging behind many other investment classes. Geopolitical upheavals in the Middle East led to increased volatility in oil prices, while U.S. tariff policies — particularly under President Donald Trump — introduced inconsistencies in the agriculture markets, such as with soybeans. Moreover, the rapidly expanding data center market driven by artificial intelligence has altered forecasts for electricity demand so significantly that even seasoned investors are uncertain about future energy consumption patterns.
These converging factors contributed to a subdued performance among commodity traders. According to data from hedge fund analytics firm PivotalPath, the average commodity hedge fund achieved a modest 2.2% gain through November 2025, markedly trailing the hedge fund industry's broader average return of 10.7%.
Among prominent players in the commodities space, Pierre Andurand's fund experienced substantial setbacks, particularly in cocoa-related trades, enduring drawdowns exceeding 50% during the first half of the year, as reported by Bloomberg. Citadel's flagship fund, generally regarded as one of the industry’s most successful, also lagged behind its peers throughout most of 2025. This performance anomaly was notable, given Citadel’s reputation and profitability, especially in its natural gas trading and overall commodities operations.
Millennium’s commodities division, led by former Goldman Sachs executive Anthony Dewell, encountered internal challenges marked by the departure of multiple senior portfolio managers, as previously reported by Business Insider. However, specific return figures for the unit this year remain undisclosed.
Despite the underwhelming results in 2025, major multi-asset investment firms recognize commodities as a critical area for growth. These firms traditionally have their heritage in quantitative strategies, equity, or fixed income trading. As their assets under management inflate, the imperative to diversify into additional asset classes intensifies. Historically, commodities trading—especially involving physical commodities — was the domain of specialized funds competing against major banks and energy corporations such as BP and Shell.
Current industry analysis suggests a shifting paradigm. A report by the data firm With Intelligence highlights that physical commodities are poised to become the foremost diversification strategy in 2026. Both established large firms and emergent start-ups are actively searching for alpha sources that are less accessible to quantitative approaches.
Insiders familiar with Point72’s strategy reveal that Steve Cohen has communicated plans to expand into commodities trading, although the firm declined formal comment. Balyasny Capital has established operations in a Danish port city dedicated to physical commodities trading, while Jain Global allocated approximately 13% of its risk to commodity trades as of mid-2025.
Further reinforcing industry momentum, Verition has recruited several senior portfolio managers specializing in energy trading during the year. The London-based quantitative trading firm Qube chose Houston, a pivotal energy trading hub, for its initial U.S. expansion. Meanwhile, Squarepoint, a quant competitor, diversified into physical metals trading within the same period.
Even dominant entities with established commodities platforms are broadening their engagements. Citadel acquired German energy trader FlexPower and made strategic hires in Australia in 2025, supplementing its 2024 acquisition of Japanese power trader Energy Grid Corporation. One of Citadel’s largest transactions involved spending about $1 billion to purchase natural gas assets from Paloma Resources in the Haynesville Shale — spanning northern Louisiana and eastern Texas. Subsequently renamed Apex Natural Gas, this entity operates fully within Ken Griffin’s firm's umbrella. Apex recently procured additional natural gas holdings from an energy company controlled by billionaire Dallas Cowboys owner Jerry Jones, as covered by Bloomberg.
Millennium continues to champion external talent acquisition by backing new commodities hedge funds headquartered in Paris and Singapore, further reflecting its commitment to expanding exposure in this sector.
The report from With Intelligence encapsulates the rationale behind this persistent interest: multi-manager funds promote themselves as reliable sources of low-beta returns, and the current inefficiencies in commodity markets present promising avenues for generating diversified alpha that traditional quant methods struggle to capture.