Secretive and powerful - how sovereign wealth is taking over

This matters because sovereign wealth funds are owned by national governments. Leading players include China, Russia, Singapore and oil-rich states such as Saudi Arabia, Qatar, Abu Dhabi, Dubai and Norway.

Adding to the controversy, some of these funds are not exactly transparent about their finances - hardly a surprise given the countries' mixed record on business ethics and human rights.

Some have been amassing cash for years; others such as China Investment Corp were founded just months ago. Morgan Stanley estimates sovereign wealth funds have more than $2.5 trillion (£1.25 trillion) in assets - more than all the world's hedge funds. That could rise to $12 trillion by 2015, overtaking official currency reserves.

Now two factors have combined to cause a spectacular buying spree. First, these governments have seen their wealth soar thanks to a boom in Asian exports and demand for oil. Stephen Jen, global head of currency at Morgan Stanley, says countries reached a turning point last year when they decided to convert dormant currency reserves into buying companies. "That shift was really quite sudden," says Jen. The second factor is the subprime crisis has created opportunities to buy cheaply.

So foreign Governments are taking huge stakes. Why isn't there an outcry? In 2006 Hillary Clinton did her Presidential ambitions no harm by helping to stop a Dubai-owned firm taking control of P&O's ports in America. Since then, subprime has exploded.

"The criticism about sovereign wealth funds ceased when the banks got into trouble," says Jen of Morgan Stanley. "Political resistance is at a minimum."

Questions are still being asked because the links between sovereign wealth and national government are so cosy. For example, Ho Ching, chief executive of Singapore's Temasek fund, which last month took a £2.5 billion stake in Merrill Lynch, is married to the country's Prime Minister Lee Hsien Loong.

No wonder Kevin Hassett, an adviser to Republican Presidential candidate John McCain, has urged Congress to consider a law that prohibits sovereign funds from exercising the voting rights of shares they purchase.

However, the White House is more laissez-faire. Experts say there is a split between Anglo and non-Anglo countries. Britain is also relaxed - both City Minister Kitty Ussher and shadow chancellor George Osborne have been upbeat. As Peter Montagnon, director of investment affairs at the Association of British Insurers, says: "The idea that large funds controlled by foreign governments can buy up strategic industries does make people nervous. But it is not helpful to close the markets off to a source of capital."

Non-Anglo countries are more protectionist. The French have talked about imposing restrictions on sovereign funds - although that would be nigh impossible without EU consent. The Swiss are also upset and investigating how UBS could lose so much money. The fact that Singapore has taken a stake in the world's biggest wealth management firm is an additional blow to Swiss pride because Singapore is positioning itself as "the new Switzerland" for private banking.

Elsewhere, the Canadians are considering cracking down on ownership rules about foreign firms buying up their companies and the International Monetary Fund is talking about a code of conduct for sovereign funds.

So how worried should we be? As Hassett says: "Imagine, to take it to the extreme, the Chinese bought Citigroup, then shut it down during a conflict with Taiwan if the US tried to interfere."

Other scenarios are not so extreme. If a Russian sovereign wealth fund - or a company like Gazprom, which is very close to the Kremlin - makes a bid for British energy firm Centrica, that could cause a huge row given Moscow's aggressive track record on gas and oil.

However, experts point out sovereign funds are long-term investors. Not all are tricky customers and if some awkward governments have a stake in the world economy, that could enhance stability. While it is difficult to compel sovereign funds to be more transparent, they may do so out of self-interest.

Whatever happens, this phenomenon won't disappear. Jen of Morgan Stanley predicts: "Sovereign wealth funds will be one of the most powerful drivers of asset prices in 2008."