Hedge funds are pouring into commodities, and Point72 also has to get a share of the pie

The Zhitong Finance App learned that as multi-strategy hedge funds pour into the volatile commodity market to increase returns, Point72 Asset Management is considering setting up a commodities business division.

According to a source familiar with the matter, at the annual investor conference held last month, the company's founder and billionaire Steve Cohen said that he is beginning to see commodities as Point72's next diversified development direction.

The person familiar with the matter added that the hedge fund has made initial contacts with potential candidates regarding the commodities business, but has yet to officially hire personnel or set aside funds for this strategy. Point72 may eventually choose not to launch a commodities business. Company representatives declined to comment.

In recent years, geopolitical turmoil, extreme weather, and trade wars initiated by the Trump administration have led to sharp fluctuations in the prices of assets such as energy, metals, coffee, and oil. In this context, multi-strategy hedge funds with huge sums of money are continuously enriching their investment strategy matrices, and the commodity sector has also attracted widespread attention from such institutions.

Looking back at the development process, Point72 and its predecessor, SAC Capital Advisors, focused on stock trading in the early years, but in recent years they have begun to expand their layout in the fields of macroeconomics, quantitative strategies, venture capital, and private credit. Up to now, about two-thirds of its assets under management of US$41.5 billion has been invested in the stock market, while the remaining capital is mainly allocated to macro strategies and its Cubist quantitative trading division.

If Point72 finally decides to enter the commodity market, it will become another large-scale multi-strategy hedge fund that lays out in this field after Citadel, Balyasny Asset Management, and Millennium Management. As an early entrant in the commodities sector, Citadel has the largest commodities trading division in the industry, and this type of asset has contributed most of its earnings over the past few years.

In 2022, the outbreak of the Russian-Ukrainian conflict triggered a global energy crisis, and the commodity market was severely shaken. Commodity traders reaped record profits back then. However, since this year, the performance of this asset class has shown a divergent trend: expectations of global crude oil oversupply continue to weigh down oil prices, while in an environment where the economic outlook is uncertain, metal prices have continued to rise.

It should be noted that commodity trading has always been accompanied by high-risk attributes, and large price fluctuations are often unbearable for institutions unfamiliar with the cyclical characteristics of this asset class. Historical data shows that in the past commodity bull market cycle, hedge funds' enthusiasm for investing in this field will heat up dramatically, but once the market reverses and prices plummet, these institutions will also quickly withdraw and shut down related businesses.