SOVEREIGN wealth funds (SWFs) that control an estimated US$3 trillion (S$4.09 trillion) in assets will meet in Singapore this week to discuss a code of ethics aimed at allaying Western fears that their investments are politically motivated.

The International Monetary Fund's (IMF) international working group of SWFs will gather today and tomorrow to thrash out voluntary guidelines that the IMF hopes will be finalised by October this year.

Highly secretive wealth funds, investment funds owned by national governments, have become increasingly active in buying Western assets in the past year, often armed with cash piles from soaring oil prices and trade.

Goldman Sachs estimated that US and European banks may need a further capital infusion of more than US$200 billion.

Analysts said that banks have already written off US$400 billion in bad investments.

But the funds' growing clout has fuelled political concerns about foreign influence over domestic assets that could spur protectionism, chilling the climate for foreign investment in the West even as the global economy slows, analysts said.

Analysts did not expect a breakthrough at the meeting in Singapore, which has already agreed with Abu Dhabi and the United States to a voluntary set of principles.

US Deputy Treasury Secretary Robert Kimmitt earlier this year described wealth funds as a force for good, but said that their rapid growth warranted a vigilant stance by Washington to ensure they remain 'a positive influence'.

Wealth funds' disclosure standards vary widely. Oil-rich Norway's Government Pension Fund publishes its portfolio holdings annually, but others such as the Abu Dhabi Investment Authority, the world's largest, and the Government of Singapore Investment Corp (GIC) will not reveal the assets they manage.

'They probably don't want to have their performance evaluated,' Sherman Chan, an economist at Moody's Economy.com in Sydney, said.

Mr Chan said that most wealth funds did not appear to have any political agenda. They are believed to always buy non-controlling stakes.

Many wealth funds said that they are being unfairly singled out, noting that Western governments have not demanded the same transparency from private equity firms or hedge funds that control equally large sums of money.

'In terms of disclosure practices, investment approach and market behaviour, SWFs are more in line with best practices than political rhetoric suggests,' JPMorgan economists David Fernandez and Bernhard Eschweiler wrote in a recent report.

One newcomer, China Investment Corp (CIC), said that it may turn its back on countries that give wealth funds too rough a ride.

'If there is too much political pressure and too much unpredictability, you just go away,' CIC president Gao Xiqing told a mergers and acquisitions conference this month. -- REUTERS