Natural gas trading setbacks may cause Citadel to record its worst annual performance since 2018 this year.

Citadel, the investment firm led by Ken Griffin, is heading toward its worst annual return since 2018, after its bet on natural gas failed to pay off, a sector that had previously been an important source of profit.

According to media reports citing a person familiar with the matter, as of December 18, Citadel’s flagship fund had returned 9.3% this year. The fund achieved gains in equities, fixed income, credit, and quantitative strategies, and even eked out positive returns in commodities (including natural gas), though those sectors posted losses earlier in the year that were gradually recovered. A spokesperson for Citadel declined to comment.

Even so, with less than two weeks of trading left until year-end, this year may become only the sixth time since Citadel’s founding in 1990 that annual returns fall below 10%, highlighting the extent to which the company has relied on commodity trading in recent years to amplify overall returns.

Nonetheless, a 9.3% return would still mark Citadel’s 17th consecutive year of positive returns, a record that has enabled it to raise more capital from investors and attract top industry talent.

With $72 billion in assets under management, Citadel has grown into a giant in commodity markets since Sebastian Barrack joined in 2017 to oversee the business. Natural gas quickly became a major contributor to the firm’s success, and Citadel was one of the first hedge funds to establish a commercial trading division, with operations covering transportation and storage of natural gas in North America.

This stands in stark contrast to the firm’s performance in 2022. That year, with the outbreak of the Russia-Ukraine conflict sparking a global energy crisis and record volatility in the natural gas market, Citadel made $8 billion from commodity trading, accounting for about half of its total profit that year. Over the next two years, Citadel continued to earn about $4 billion annually from commodities, which, according to sources, accounted for roughly a third of the firm’s annual gross returns.

Citadel is not the only institution facing headwinds in energy trading. Major oil companies, commercial trading firms, and other hedge funds have all found it difficult to profit from energy markets this year. Geopolitical turmoil and intense fluctuations triggered by President Trump’s tariff policies have made it harder to establish and hold trades for the long term.

According to informed sources, almost all of Citadel’s multi-strategy peers have struggled to achieve remarkable returns in energy this year. However, these funds do not have as deep an exposure to energy trading as Griffin’s Citadel, so the drag on performance is relatively less.

Citadel has been expanding its physical asset operations to increase sources of income and gain an informational edge. This year in the US, the hedge fund completed a series of deals that gave it access to key natural gas production in the Haynesville shale basin. With LNG exports and demand expected to grow and the electricity needs of AI data centers surging, this region is considered critical.

Griffin’s firm is also positioning itself to capture power market volatility. Earlier this year, Citadel agreed to acquire the German electricity trading company FlexPower, which helps clients—including renewable energy producers and battery operators—hedge against price fluctuation risks.

Other major institutions, including Jane Street Group and Qube Research & Technologies, have also followed Citadel’s lead and begun expanding their presence in physical natural gas trading.

After volatility surged in European natural gas markets in 2022, it has now dropped sharply and is back to pre-crisis levels. Natural gas prices have also plunged, falling about 40% so far this year, thanks to mild weather, ample supply, and renewed US efforts to broker peace in Ukraine.

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