Sovereign wealth funds are investment vehicles typically controlled by rich countries with trillions of dollars at their disposal ready to invest abroad.

The funds have been around since the early 1950s, created to absorb hazards posed by fluctuations in the prices of raw materials, develop infrastructure and finance pensions.

But their ranks have swollen in recent years and the term Sovereign Wealth Fund first appeared in 2006.

French President Nicolas Sarkozy on Tuesday backed the creation of sovereign wealth funds in Europe to support industry during the financial crisis.

"I'm asking that we think about the possibility of creating, each one of us, sovereign funds and that perhaps they could be coordinated to provide an industrial response to the crisis," he told members of the European Parliament.

The funds have been created by governments of countries that have surplus savings due to either large oil and gas resources (such as the Middle East, Russia or Norway), budgetary surpluses (Singapore) or foreign exchange reserves in their central bank (China).

The level of their assets is difficult to evaluate, as the states concerned say little on the question.

The International Monetary Fund says they are valued at between 1.9 and 2.8 trillion dollars and they could value 12 trillion dollars by 2012. The UN Conference on Trade and Development (UNCTAD) says SWFs control assets worth about five trillion dollars.

The SWFs have come under scrutiny after several took huge stakes in Western financial firms hit by the US subprime home loan crisis that erupted in August 2007.

Among high-profile investments were the Abu Dhabi Investment Authority's investment of 7.5 billion dollars in Citigroup while the Government of Singapore Investment Corp injected 11 billion Swiss francs (10.5 billion dollars) into Swiss bank giant UBS, one of the worst hit by the subprime crisis.

Between May 2007 and February 2008, they invested more 52 billion dollars into a struggling US and European financial sector, according to the economist Benoit Coeure.

They have also entered the capital of several large groups, like the oil group Total in France.

In terms of large-scale cross border mergers and acquisitions, their involvement jumped from one case in 1987 to 30 in 2007, UNCTAD said in its latest World Investment Report.

Some argue that the funds are too opaque and that government acquisitions of stakes in strategic sectors could pose threats to national security as governments controlling sovereign wealth funds use them to advance their own political and strategic aims.

That is why the IMF has recently drawn up a code of good conduct calling on the funds to respect rules of good governance.

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