INVESTORS who poured millions into resources funds in this year’s Isa season are nursing losses of up to 50% in only six months as analysts warn that the commodity boom is over.

Resources funds, which invest in oil and mining shares, were bestsellers at the height of the Isa season in February as investors sought a shelter from the turbulent equity markets.

The £1.4 billion JP Morgan Natural Resources fund has been among the top ten on adviser Hargreaves Lansdown’s Vantage fund supermarket every month since February. Now it is down 47% in six months as the prices of everything from oil and metals to wheat have tanked.

Crude fell below $80 for the first time in a year last week, closing on Friday at $77.7 — 44% below its peak of $145 in July.

Metals have plunged 39% since their peak in March and agricultural commodities and livestock prices — one of the hottest investment themes earlier this year — are off 31% as investors fear a global economic recession will hit demand.

Tobias Levkovich, chief US strategist at investment bank Citigroup, has warned of a bubble in commodities since the beginning of the year, when most other analysts were convinced prices were in a “super cycle” that would beat the crunch. He said: “Agricultural commodities and fertiliser names were on borrowed time. Excessive increases in farmland values only added to our concerns that investors had taken the ‘everyone has to eat’ perspective too far, thereby putting so-called soft commodities at risk as well.”

The commodities crash has also hit the stock markets of Brazil and Russia, which were heavily tipped earlier in the year — although there were some dissenting voices.

Peter McGahan of adviser Worldwide Financial Planning said: “The sharp falls in commodity prices make Brazil and Russia unattractive and was the reason we sold out six months ago.

“While many have tried to defend Russia’s story, using the argument that its low price/earnings (p/e) ratio means it is cheap, I don’t agree.

“Earnings could get battered and, as such, they are not a reliable measurement. In any event, the political issues, apparent lack of concern by the Russians and overall unrest make the region as attractive as a politician.”

Investors are therefore being urged to check they do not have too much of their portfolios in commodities, especially as oil and mining companies make up such a large portion of UK funds.

Mining, oil and gas companies accounted for an astonishing 50% of the FTSE 100’s market capitalisation close to their peak in summer.

The average fund in the UK All Companies sector had nearly 26% in oil and mining companies, according to the data firm, Morningstar — less than the index, but still a worry now that the bubble has burst.

Advisers said that if you have too much in the sector and it causes sleepless nights, switch to less volatile assets such as bonds or income funds — though a move into the former now will be buying in at high prices. It might be better to sit tight.

Fund managers insist that long-term prospects remain sound. Ian Henderson of the JP Morgan fund said: “As this drift [from the countryside to the city] continues in emerging market countries, more steel is needed to build the new railways, more coking coal is needed to smelt the steel and more energy, whether it be coal, oil or uranium to name a few, is needed to power the railways and the new homes.”

He points out that the prices of oil and mining companies are trading on only six to seven times earnings, compared with around 10 times for global companies in general.

The shares of gold miners are also at a record low compared with the bullion price itself.

“Commodity markets have and probably always will be volatile over the short term but I can see no reason why growth over the next 10 years or more should not mirror that of the previous 10 years,” he said.

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