Investors will allocate even more money to commodities this year as they seek to spread risk away from more established investments such as equities, according to New York-based fund manager Gresham.

Commodities such as gold, oil, copper, as well as softs like sugar, boomed in 2009, drawing in tens of billions of dollars in investments from pension funds and wealth managers hit by the financial crisis and global economic downturn.

Gresham Investment Management LLC saw its assets under management in commodities more than double last year to over $7.5 billion, its director of research, Douglas Hepworth told Reuters.

"There is going to be a very significant increase in the investment in commodities in 2010 - at a similar rate to 2009," Mr Hepworth said by telephone from New York. "We are seeing a lot of interest in commodities. Last year was a big inflow year and we have not seen interest abate. It seems to be increasing."

"We, for instance, had a more than a doubling of assets in commodities in 2009 and that kind of rate is not sustainable for a very long time," he said. "I would not be surprised to see similar growth to what we saw last year."

"Very strong momentum is intact," he added.

Figures from Barclays Capital show global assets under management in passive, long-only commodities funds increased by $93 billion last year to $255 billion.

Gresham is an institutional fund manager, investing in diversified commodity portfolios. It does not invest in either physical commodities or exchange-traded commodities, but buys long-only futures and is part of a group of investors that represent around two per cent of the futures market.

Its investments offer diversification of risk away from stock markets, currencies and debt, the company says.

"If you look over the long-term - 50 years - commodities and equities do about the same in terms of returns, but out of sync with each other," said Mr Hepworth. "Whatever excess returns you expect from equities long-term, commodities are not going to be far from it. They have the same driver."

Sharp falls in many financial markets over the last two years have led many to look favourably at commodities and increase exposure to investments that were once seen as exotic.

"Three years ago, people were thinking about three per cent allocations for commodities," he said. "Now what I am seeing is people are starting at five (per cent) in commodities," he said.

He said many investors in commodities tried to match well-known indices such as the S&P GSCI, the world's largest commodity index, or the Dow Jones-UBS Commodity Index.

But many investors were looking to focus their investments:

"You are now seeing more people wanting to make focused bets. Last year, you saw a lot of people looking at focused bets in precious metals. Two years ago and returning this year people are talking about focusing on ags (agricultural commodities)."

Mr Hepworth said investors needed to be aware of some hazards when investing in futures, such as roll losses when a market was in contango with the front month at a discount to later months.

"When roll yield is very negative, investors have a tendency to avoid those commodities, but historically periods when roll yields are negative are usually followed by strong price performance, so if you rush out of the commodities with contangos into the backwardated commodities, they risk making exactly the wrong bet," Mr Hepworth said.

"You want to be very thoughtful about how you implement this asset class. Being passive can be harmful to your health."