Mideast bankers on Monday staunchly defended sovereign wealth funds - the vast government-directed pools of investment money that have raised controversy in the West - contending they helped save the US financial system from collapse. But World Bank President Robert Zoellick cautioned that the funds will continue to raise international concern as countries question whether their investments are driven by the search for profit or by political interests that could threaten national security. The United States and the European Union have pushed sovereign funds to provide greater disclosure about their investment strategies and are backing an initiative by the International Monetary Fund and the Paris-based Organization for Economic Cooperation and Development to develop a voluntary set of best practices for the investment vehicles. But many bankers and investment managers say the concerns are overblown and point out that the funds swooped in to provide much-needed capital to the US financial system when it was recently reeling from the mortgage crisis. They maintain the funds are passive investors with no political agenda. "There is no need to be alarmed," said former Pakistani prime minister and Citigroup Inc. executive Shaukat Aziz at the World Economic Forum on the Middle East, an offshoot of the annual gathering of political and business leaders in Davos, Switzerland. "In fact, I should say we should give a vote of thanks to all the sovereign funds... who came in and saved the global financial system," added Aziz on the second day of the three-day summit. Sovereign funds from China, Singapore and the Middle East have invested more than $40 billion in Citigroup Inc., Merrill Lynch & Co. Inc., and Swiss bank UBS since late last year. Analysts estimate that approximately 40 sovereign funds worldwide control about $2.5 trillion in assets, a total that could reach $12t. by 2015. Sovereign funds in the Mideast and Russia have surged in recent years from soaring oil prices, while China has benefited from a growing trade surplus with the rest of the world. Cyrus Ardalan, vice-chairman of London-based Barclays Capital and a board member of the Dubai International Financial Centre, said the size of sovereign wealth funds should be kept in perspective relative to other financial assets. He said the top 300 pension funds in the world have $10t. in assets, and US consumers have $45t. "Even if they [sovereign funds] were to grow by a factor of two to three times, they are modest in comparison to the total pool of assets managed by institutional investors," Ardalan said. Many finance professionals say sovereign funds should be treated no differently than private pools of capital. Otherwise, countries risk losing out on a key source of investment. "I think yes, more disclosure is important, but I would say that even on this point I think we have to be cautious not to ask from the sovereign wealth funds something that we don't ask from other large institutional investors," Ardalan said. But Zoellick pointed out that Western concerns about sovereign funds could not be dismissed, given the history of governments using investment for political purposes. "I do think, however, we need to be fair in analyzing one of the reasons for the concern here is that the history of government allocation of capital has not been such a good one over time," he said. "So people are legitimately asking... what are the purposes, what are the return objectives?" Many Europeans have been wary of Russian energy investment in recent years in eastern Europe and the leverage over oil and gas supplies it gives the Russian government. Ibrahim Dabdoub, head of the National Bank of Kuwait, said sovereign funds managed by US allies in the Middle East should not be analyzed in the same light as those run by much larger countries with more international influence. "And the problem that we have here is they bundle us with China and Russia," he said. "Most of these sovereign wealth funds are owned by countries that are so small." The size of tiny oil-rich Gulf countries has not stopped the US government from worrying about the impact of their investments. Lawmakers effectively torpedoed an effort by an Emirati company to manage six of the largest ports in the US in 2006, contending the Bush administration and the agency responsible for reviewing security issues had not fully considered all of the security concerns that had been raised. Earlier this year, officials from the Emirati capital of Abu Dhabi, home to the world's largest wealth fund, sent a letter to the Bush administration and other Western governments spelling out the principles that guide its investment procedures. The White House later announced that it had reached agreements with both Abu Dhabi and Singapore that they would not use their sovereign wealth funds to further their political goals. Zoellick said he disagreed with the Congressional response to the Dubai ports deal, but added that politicians in a democracy could not ignore public concerns about national security. "It may turn out that government ownership is fine," he said. "But it could be a problem if you have a certain country that wants to buy a certain company to get the technology or something else."