It was not so long ago that hedge funds and commodities were the two red hot areas to invest in.

The credit crisis has shown that investor interest can quickly cool.

Many hedge funds betting on a so-called “super-cycle” have been caught out by a sharp pullback in commodities after a five-year bull market and are now facing the task of soothing anxious investors.

One of those to have suffered - hedge fund firm RAB Capital - is trying to strike a bargain with investors in its flagship Special Situations strategy, which has plunged 48 percent year-to-date after some bad bets on mining stocks plus a high-profile mistake at Northern Rock.

With investors able to pull out money every three months after giving notice, and with much of its assets in small-caps that will prove much harder to sell in down markets, RAB is in a potentially tricky situation.

Its proposition to investors is for them to tie up their money for three more years, giving it some breathing space and the fund’s holdings time to recover.

In return, RAB will halve its management fee - once a high figure that hedge fund industry investors were only too keen to pay - to 1 percent.

If this doesn’t work, RAB will liquidate the once high-flying fund and give investors their money back.

Only last week Ospraie Management said it would close its flagship hedge fund after it plunged 27 percent in August and said investors would have to wait up to three years to get back some of their cash - not exactly the type of statement that will draw new investors to the industry quickly.