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(Refiles to fix link to performance table in 6th paragraph)
* Top commodity funds up over 7 percent in Q2
* Average actively managed fund up over 2 percent
* Base metals expected to perform well in H2
By Claire Milhench
LONDON, July 10 (Reuters) - Commodity funds delivered robust returns in the second quarter, consolidating their recovery since the start of the year, with rallies in energy and metals boosting the top performers in the Lipper Global Commodity group.
Leading commodity fund managers say base metals should continue to perform well in the second half of 2014, with investor sentiment towards China improving, but the upside for oil is seen as more limited.
Commodities have put in a solid performance so far this year, although returns eased a little in the second quarter.
The average actively managed fund in the Lipper Global Commodity sector was up 2.18 percent April-June, with the top performers achieving plus-7 percent returns.
Some of these funds invest in both commodities futures and natural resource equities, and so benefited from a rally in energy and mining stocks as well as a run up in futures prices.
For a table of top performing commodity funds in Q2, see
Of the pure futures funds, one of the highest ranked was the $472 million Commerzbank Rohstoff Strategie Fond.
This returned 5.42 percent and came eighth in the Lipper league table, fuelled by chunky exposures to Brent crude oil, industrial metals, platinum and palladium.
Eugen Weinberg, head of commodity research at Commerzbank, whose team advises on the fund, said they had been bullish on commodities since the start of the year, partly because the consensus was pretty bearish.
"But contrarian thinking on commodities markets often pays off, especially the overlooked commodities, and it looks as if too much pessimism was priced in," he said.
Thomas Timmerman, head of asset management IB at Commerzbank, said the fund had done well because of its large exposure to the futures market in the second quarter, when it was 90-95 percent invested.
He said commodity prices had risen by between 5 and 15 percent since the start of 2014, but many investors missed out as they have tended to focus on equity markets.
"There is definitely something happening in the commodity market, but the asset class hasn't been on their radar," Timmerman said. This could be changing as in the last six weeks or so, Commerzbank has seen good inflows into its fund, he said.
Of the hybrid funds, the $424 million BlackRock Commodity Strategies Portfolio performed well, up 4.72 percent. Catherine Raw, a manager in the fund team, attributed its outperformance to energy and precious metals stock picks, as market sentiment improved.
At the end of the quarter the fund had 24 percent in energy names such as Exxon Mobil, Chevron and Royal Dutch Shell.
Energy was the strongest performing equity sector last quarter due to a combination of attractive valuations relative to the rest of the market, increasing confidence in managements' focus on capital discipline and supply-side disruptions supporting the oil price, Raw said.
"Mining equities also performed well with gold equities delivering strong outperformance relative to the gold price," she added.
Both BlackRock and Commerzbank see good upside potential in industrial metals, with Commerzbank expecting an emerging market recovery to accelerate in the second half of 2014, driving base metals demand.
The fund currently has about 28 percent in base metals and 20 percent in platinum and palladium.
"There is strong momentum behind the industrial metals - copper, zinc, lead - but also the precious metals with an industrial character such as platinum and palladium," said Weinberg. He cautioned that the recovery would be "bumpy" so the fund retains an overweight to gold, for capital preservation.
Raw agreed that the outlook for base metals had improved as the expected surpluses that many in the market had predicted had not materialised. "Copper, zinc and aluminium inventories have declined suggesting the market has returned to deficit, at least temporarily," she said.
She added that the Chinese economy remained an area of uncertainty, but stronger macro data and targeted easing of liquidity by the government is helping to restore market confidence, at least in the short term.
"This should be supportive for commodities such as iron ore, which were weak in the second quarter owing to increasing supply and weaker than expected Chinese steel demand growth," she said. Iron ore is a major component of the big miners' cash flow and earnings, so a recovery in iron ore prices should be positive for the sector.
By contrast, Weinberg said there was less upside potential for oil prices as the conflict in Iraq has so far failed to have any lasting effect on exports or infrastructure. (Reporting by Claire Milhench; Editing by Ruth Pitchford)