Hedge funds are pouring into commodities, and Point72 wants to get a piece of the action.

With more and more multi-strategy hedge funds pouring into the volatile commodities market to enhance returns, Point72 Asset Management is considering setting up a commodities business department. 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 starting to view commodities as Point72's next direction for diversification. The source added that the hedge fund has had preliminary discussions about the commodities business with potential candidates, but has not yet formally hired personnel or allocated funds for this strategy. Point72 may ultimately choose not to pursue the commodities business. The company's representatives declined to comment on this. In recent years, geopolitical turmoil, extreme weather, and trade wars initiated by the Trump administration have led to sharp fluctuations in asset prices such as energy, metals, coffee, and oil. In this context, multi-strategy hedge funds with large pools of capital are continuously enriching their investment strategies, and the commodities sector has also attracted widespread attention from these institutions. Looking back at its development history, Point72 and its predecessor SAC Capital Advisors initially focused on stock trading, but in recent years have expanded into macroeconomics, quantitative strategies, venture capital, and private credit. As of now, about two-thirds of their $41.5 billion in assets under management are invested in the stock market, with the remaining funds primarily allocated to macro strategies and their Cubist quantitative trading department. If Point72 ultimately decides to enter the commodities market, it will become another large multi-strategy hedge fund to enter this field after Citadel, Balyasny Asset Management, and Millennium Management. As an early entrant in the commodities sector, Citadel has the largest commodities trading department in the industry, with such assets contributing most of its profits in recent years. In 2022, the Russia-Ukraine conflict sparked a global energy crisis, leading to intense volatility in the commodities market, where trading firms achieved record profits that year. However, the performance of this asset class has shown a divergence this year: expectations of oversupply continue to suppress oil prices globally, while metal prices have been rising amid uncertain economic prospects. It is important to note that commodity trading is inherently high-risk, with significant price fluctuations that can be difficult for institutions unfamiliar with the cyclical characteristics of this asset class to tolerate. Historical data shows that during past commodity bull markets, hedge funds' enthusiasm for this sector would soar, but once market conditions reverse and prices plummet, these institutions quickly exit and close related businesses.