Hedge funds piling into commodities

 Hedge funds are increasingly turning to physical commodities (PDBC) markets in search of new returns, expanding their traditional trading operations.

Firms like Balyasny, Jain Global, and Qube are moving beyond financial contracts to directly engage with physical markets, including power, natural gas (FCG), and oil (BNO) (USO), the FT reported. 

This shift is driven by the desire to capitalize on information advantages and price volatility, akin to the successes of leading trading companies such as Trafigura and Vitol.

Balyasny has bolstered its power trading and research teams by recruiting talent from European utilities, while Jain Global has ventured into natural gas trading by acquiring Anahau Energy. Similarly, Qube has forayed into European physical power through its affiliate Volta, reflecting a broader trend among hedge funds to diversify their investment strategies and exploit volatilities in the commodities sector.

Despite the lure of potential profits, the move into physical commodities is not without risks. Hedge funds must navigate new challenges outside their traditional expertise, including logistical and operational complexities. However, the potential for lucrative returns, especially during times of high market volatility, continues to attract financial firms seeking diversified revenue streams.

https://www.msn.com/en-us/money/markets/hedge-funds-piling-into-commodities/ar-AA1SkSgt