Steve Cohen Mulls Commodities Unit as Hedge Funds Pile Into Bets

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(Bloomberg) — Point72 Asset Management is considering building a commodities business as multistrategy hedge funds jump on the volatile play to drive returns.

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Billionaire founder Steve Cohen said at an annual investor day last month that he’s starting to think about commodities as Point72’s next diversification move, according to a person in the room.

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The hedge fund has had preliminary conversations with potential candidates for commodities but hasn’t made any hires or set aside cash to invest in the strategy, the person said, asking not to be identified because the meeting was private. Point72 may opt not to pursue commodities.

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A representative for the firm declined to comment. 

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Multistrategy hedge funds have been adding strategies to put their billions to work — and commodities have drawn interest from such firms in recent years as geopolitical turmoil, extreme weather and President Donald Trump’s trade wars spark volatility in assets such as energy, metals, coffee and oil.

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Point72 and its predecessor, SAC Capital Advisors, focused on trading stocks in its earlier years but more recently began ramping up bets tied to macroeconomics, quantitative strategies, venture capital and private credit. Now about two-thirds of its $41.5 billion of assets is invested in equities, with the rest mostly in macro and its Cubist quant unit.

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If Point72 ventures into commodities, it would be one of the last large multistrategy funds to do so — following Citadel, Balyasny Asset Management and Millennium Management. Citadel, an early entrant into commodities, has the biggest such trading unit of its peers, with the asset class driving much of its returns in past years.

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In 2022, commodities traders raked in record profits after Russia’s invasion of Ukraine triggered a global energy crisis and sharp volatility. This year has been uneven for the asset class — with a looming global glut of oil dampening prices, while metals have soared on economic uncertainty.

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Commodity trading can often be high risk, and the big swings can be difficult to stomach for firms that are unfamiliar with the cyclical nature of the asset class. The industry has seen interest from hedge funds surge in previous booms, but they were also quick to shutter when prices crashed.

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—With assistance from Devika Krishna Kumar.

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