Jonathan Compton, managing director of long-only equity investment group Bedlam Asset Management, which has around US$620-million in assets under management, said oil, copper and some other commodities are vulnerable to sharp corrections.

Disappointed by losses in stock markets and bonds in the recession, investors had turned to commodities in the hope of better returns, with many borrowing at very low interest rates.

"You will see a fantastic unwinding of the speculative longs the moment rates move up," said Mr. Compton.

"Commodities most vulnerable will be the ones that are most widely held: copper and oil ... and some very funny financials."

Pension funds and money managers have tripled their holdings in commodities markets since 2007, industry data shows, with US$250-billion to US$300-billion now invested by passive long-only funds.

Hedge funds and other actively managed units also hold huge stakes in commodities and together buy-side investors control as much as half of the open interest in some commodity markets.

This has made some commodities, inflated by speculative, short-term capital, vulnerable, some analysts say.

Mr. Compton is particularly scathing of some exchange-traded products, some of which he said were "structurally odd" or administered in several countries, preventing proper oversight.

ETPs and exchange-traded funds are listed vehicles allowing buyers to hold securities that move up and down with a commodity or other investment. Most gold ETFs are backed by bullion and seen as almost risk free. But other ETPs are more exotic, based on futures or derivatives or are highly geared.

"The industry is probably 95% clean, if not more. But you only need a couple to go off and you have a domino effect. Then you get real panic and commodities get dumped," he said.

Mr. Compton said copper and oil could both be vulnerable to downward corrections, and the fall in copper could be serious.

"Copper stands out because it is the absolute bellwether proxy industrial metal. My concern is the very long positions in ETFs ... there is rampant speculation."

"World copper stockpiles are rising and more and more ETFs are being sold," he said. "If a commodity price is rising along with reserves, there is clearly a mismatch. ETFs are temporarily taking supply off the market -- but it is very temporary."

He estimated the cost of mining at "well below [US]$3,000 a tonne" compared with current futures of more than US$6,500.

Bedlam holds no oil shares, having sold them in the run-up to the record high near US$150 per barrel in 2008.

"With oil, stockpiles are high, while demand is basically flat and supplies are plentiful until there is a political upset somewhere and it very widely held," said Mr. Compton.

But Bedlam does like some commodities. It owns four gold miners, all of which are in its top-20 holdings: Goldcorp Inc., Yamana Gold Inc., Agnico-Eagle Mines Ltd. and Lihir Gold Ltd. These make up 9% to 11% of the value of the funds that can hold them.