Citadel, the hedge fund led by Ken Griffin, is on track to post its lowest annual returns since 2018 due to underperformance in natural gas bets, which had previously been a major profit driver for the firm.

As of December 18, Citadel's flagship fund reported a 9.3% return for the year, according to a source familiar with the matter. While the fund generated profits in equities, fixed income, credit, and quantitative strategies, its commodities business—including natural gas—only managed to break even after recovering earlier losses. A Citadel spokesperson declined to comment.

With less than two weeks left in the trading year, 2024 could mark the sixth time since Citadel's founding in 1990 that its annual returns fall below 10%, highlighting the firm's recent reliance on commodities trading to boost performance.

Since Sebastian Barrack joined in 2017 to oversee the business, the $72 billion hedge fund has become a dominant player in commodities markets, with natural gas emerging as a key contributor to its success.

This year's performance stands in stark contrast to previous years. In 2022, Citadel earned $8 billion in commodities—about half its total profits—as Russia's invasion of Ukraine triggered record volatility, particularly in natural gas markets. Over the next two years, the firm continued to generate roughly $4 billion annually from commodities, accounting for half its total gains.

Despite the weaker returns, a 9.3% annual gain would extend Citadel's streak of positive performance to 17 consecutive years—a track record that has helped the firm attract investor capital and top industry talent.

Citadel isn't alone in facing challenges in energy trading. Major oil companies, commodity traders, and rival hedge funds have also struggled to profit amid geopolitical turmoil and market volatility fueled by former U.S. President Donald Trump's tariff policies, which made it difficult to establish and maintain trading positions.

Most of Citadel's multi-strategy peers have also posted minimal gains in energy trades this year, sources say. However, these firms typically have smaller energy exposures than Griffin's hedge fund, limiting the overall impact on their returns.