LONDON (REUTERS) - Sophisticated commodity funds that switch between different strategies in pursuit of performance are gaining favour with investors, who have lost patience with single-strategy products.

Commodity investors complain they are paying active management fees for returns that are essentially no better than the market as a whole - or "beta" in investment management parlance.

Mark Higgins, managing director of UK-based financial group 1Oak Capital, said some commodity hedge funds persisted for too long with non-performing strategies and have had to close or have suffered large drawdowns as a result.

Clive Capital is one such high-profile casualty, which returned money to investors this year and cited limited"suitable opportunities" for its directional, long volatility approach.

"It's impossible to have one strategy that performs in all market environments," Charles Cresteil, a commodity investment specialist at BNP Paribas IP, told investors at the World Commodities Week conference in London in October.

Cresteil recommended that investors look for strategies that complement each other and then adjust their allocations to fit the market backdrop.

But investors said this was too complicated and that switching repeatedly was too much work for a small pension fund.

Instead, interest is growing in more complex multi-strategy funds, which aim to do this for them.

Daniel Bathe, a portfolio manager for the multi-strategy Lupus alpha Commodity Invest Fund, said he had seen an increase in investor enquiries this year as well as decent inflows.

Lupus uses quantitative models to analyse fundamental factors, but ultimately its managers choose which strategies to deploy. The aim is to deliver steady returns regardless of market conditions.

For example, directional long/short strategies in base metals would have performed poorly this year as fundamentals have been mixed, Mr Bathe said. Instead, the fund has used relative value and volatility strategies to make money.

The 130 million euro Lupus fund has returned some 5 per cent per annum since its launch in 2006, with a volatility of 5 per cent, Mr Bathe said.

Multi-strategy funds are still relatively niche in Europe as institutional investors have tended to prefer simpler approaches. But investor dissatisfaction is now so high that multi-strategy funds are coming to market even before establishing a track record.

"Traditionally you needed a three-year track record to attract pension funds, but some of them have lost patience with poor performance and pulled the plug," Mr Higgins said. "Now they have to look elsewhere."

1Oak Capital is just rolling out its multi-strategy Acorn fund, which currently consists of five systematic market-neutral commodity strategies built in-house including relative value, momentum and spread trades. A sixth strategy based on energy volatility is about to be added.

Setting the new fund apart, it phases out strategies when their sources of "alpha", or performance above a benchmark index, diminish, and brings on new ones.

"It's a self-reinventing engine," said Giovanni Bonnaccorso, the firm's chief executive.

The fund will run between five and 10 strategies over the next two years as more are developed, tested and then implemented, he said.

"That will allow us more capacity and more stability of returns."

Since its inception in April 2012, Acorn has returned a net 9.04 per cent, with volatility of 5.56 per cent. By comparison, the Newedge Commodity Trading Index, a measure of peer group performance, was down 1.93 per cent in 2012 and is down 1.01 per cent so far this year.