Pension and mutual funds are increasing their exposure to commodities markets as they seek to diversify their portfolios, attracted by the strong returns provided by energy and metals markets over the past few years.

Heather Shemilt, managing director of commodity marketing at Goldman Sachs, said that the amount tracking commodity indices had risen from about $15bn in mid-2003 to about $40bn at the end of 2004. Ninety per cent of this injection of cash came from pension funds.