Commodities trades stung hedge funds this year. It's not stopping firms from piling in.

"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."

Commodities-focused hedge funds produced weak returns in 2025 amid oil-price volatility, crop-price swings and uncertain electricity demand from AI data-center growth. The average commodity hedge fund gained only 2.2% through November versus a 10.7% industry average. Prominent managers suffered large losses, including drawdowns exceeding 50% on cocoa trades, while multistrategy firms such as Citadel and Millennium lagged peers in key funds and lost senior personnel. Despite underperformance and heightened risks from geopolitics and trade policy, asset managers are increasing commodity allocations as a diversification avenue as multistrategy firms expand beyond traditional equity and fixed-income exposures.

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