May 1 (Bloomberg) -- Money in funds tracking the two most popular commodity indexes jumped 48 percent so far this year, showing investors have may have influenced record energy, food and metals prices, according to Sanford C. Bernstein & Co.

Investments following the Standard & Poor's GSCI index and Dow Jones-AIG Commodity Index have risen to $250 billion from $169 billion at the start of the year, Ben Dell, an analyst at New York-based Bernstein, wrote in a report published yesterday.

``The role that financial funds flow plays in setting the price of commodities remains one of the most hotly debated topics,'' Dell said. ``While the debate was originally centered on the oil market, it is now spreading to the world of corn, wheat and rice, as soft commodities now surge.''

Oil this week climbed to $119.93 a barrel, a record, while wheat and corn jumped to all-time highs in 2008, partly as pension and hedge funds switched away from a slumping dollar and tumbling stock markets. Countries including Haiti and Egypt have been hit by social unrest because of rising food prices that the World Food Programme said may result in a ``silent famine'' for the poorest in Asia.

``For a number of commodities, there is a strong near-term correlation between growing open interest and rising prices,'' Dell wrote. Open interest, the number of contracts that haven't been closed, liquidated or delivered, indicates the level of investor demand.

Prices Decoupled

The California Public Employees' Retirement System, the largest U.S. pension fund, said in February it may increase its commodity investments 16-fold to $7.2 billion through 2010 as it seeks to benefit from gains in gold, copper, wheat and oil.

Oil prices ``are increasingly decoupled from formerly predictive inventory, spare capacity and marginal cost relationships,'' Dell added. ``The global implications for inflation and GDP have become more significant than ever.''

Oil's gain to almost $120 a barrel is caused by speculation by investors, OPEC members Kuwait, Libya and Qatar said yesterday.

``The fundamentals aren't controlling the price,'' Kuwait's acting oil minister Mohammed al-Aleem said in an interview.

The rally in commodities is caused by supply shortages and rising demand, not speculation by investors, said Tim Bond, head of global asset allocation at Barclays Capital. The argument that there's a ``speculative bubble'' fails to explain why rare metals such as cobalt that aren't traded on futures exchanges have risen as much, or in some cases more, than those that are, Bond wrote today in a report.

`Speculative Bubble'

This month rice rose to a record $894 a metric ton, while corn climbed to $6.24 a bushel, its highest ever. Wheat touched a record $13.495 in February.

``Investors are following the market, not causing it,'' Bond said in a separate phone interview from London. ``If everyone keeps saying that there's a speculative bubble, then nothing will be done about rising food prices. And that's a real global emergency.''

The S&P GSCI index of 24 commodity futures has returned 19 percent this year, while the Dow Jones AIG Commodity Index of 19 contracts, the worst-performing commodity index of those tracked by Bloomberg, has returned 14 percent.

By comparison, the S&P's 500 Index of U.S. stocks fell 5.6 percent in the period. U.S. Treasuries have returned 2.6 percent, according to Merrill Lynch & Co. indexes.

Funds that follow commodity indexes allow investors to replicate the gains and declines in prices of a selection of commodities without owning them. Returns on assets accounted for $35 billion of the $81 billion added to commodity funds this year, Bernstein said.

To contact the reporter on this story: Saijel Kishan in London at skishan@bloomberg.net

Last Updated: May 1, 2008 11:36 EDT