Little-noticed amid the financial market meltdown, 26 sovereign wealth funds (SWFs) met in Santiago, Chile, last month where they agreed to prepare a set of principles for their future operations.

Just a month ago, those discussions seemed little more than matter of arcane governance. Now, they could be crucial to the future of the global financial system and perhaps even the basis of a new order.

The funds, many owned by resource-rich countries in the Middle East or Asian governments looking for a home for growing foreign reserves, have had their share of controversy.

Estimates of SWF assets under management range from $2 trillion (£1.12 trillion) to more than $3 trillion, a figure the International Monetary Fund says could reach $12 trillion within 10 years.

Altogether they have invested more than $60 billion (£33.69 billion) in the banking system over the past year, buying stakes in companies such as Morgan Stanley, Merrill Lynch, Citigroup and UBS — only to see the value of those investments plummet.

But SWF capital has not always been welcomed. Britain has generally been open, but investments in prominent companies in Europe and the US have often become political footballs — particularly in a US election year — with politicians raising national security issues, demanding greater transparency and guarantees against political involvement in investments.

The results of the Santiago negotiations, set up to address these concerns, are due to be presented to the IMF on 11 October. Ironically, now that the need for capital and liquidity has never been more acute, SWF appetite for investments, particularly in the financial sector, has never been weaker.

"Long-established global institutions are finding systemic and counter-party risks in the financial sector almost impossible to quantify, so we should not be surprised if sovereign funds slow their investment until the situation has stabilised," says private-equity adviser Dag Detter.

"The sovereign funds are growing in expertise, but they have not been structured to deal with the exceedingly low visibility we are experiencing."

London-based Detter is a former banker and adviser to the World Bank and a range of governments in Europe and Asia. He has experience with wringing commercial returns from state-owned businesses in a previous role as president of Stattum, the Swedish state-owned enterprises (SOEs) holding company, and led the transformation of the Swedish government's €60 billion (£47.48 billion) corporate portfolio. He is currently a senior advisor to Guy Hands' private equity firm Terra Firma, a non-executive director of property group DTZ and a regular visitor to Beijing where he has close contacts with some of the world's largest sovereign funds.

Detter says that in time the funds will come back and will be crucial to rebuilding the global financial system. "When the dust settles, they will have a role to play in stabilising the system and returning it to normal," he says. "After governments have injected capital to stabilise the situation the funds may be the only organisations with sufficient liquidity to provide support. Then their investment will be very much on the agenda, but for now the conditions are probably too risky."

One exception, he suggests, could be SWFs operating in partnerships such as China Investment Corp (CIC), the country's $200 billion sovereign wealth fund, which has teamed up with JC Flowers & Co. In April they launched a $4 billion private-equity fund to focus on investments in US financial assets with CIC providing about 80% of the contributions to the fund and former Goldman Sachs banker Christopher Flowers' firm offering about 10%.

"That strikes me as a clever way for the funds to do it — to take advantage of Flowers' sophistication in the markets as opposed to going in on your own, which is pretty risky," says Detter.

If the CIC deal is anything to go on, the sovereign wealth funds will be able to drive ever-harder bargains.

The deal meant JC Flowers became CIC's first overseas private-equity fund manager but came with tough conditions. Usually a private equity fund manager would be asked to contribute about 2% of capital to a new fund but CIC is making Flowers invest more money, sharing more responsibility and risk.

Detter says that it is in everyone's interests that the SWFs hammer out the long-term Santiago accords to balance their interests with demands for greater transparency from governments in the West. "There are three fundamentals for success with SWFs or state-owned enterprises," he says. "There must be political insulation — politicians are not best placed to direct investment, will have to take responsibility when things go wrong and will not always gain credit from success.

"The funds need clear objectives based on maximising long-term returns. And then there must be transparency."

Detter says that host countries must be more understanding of the needs of the funds and how to work with them, too. "Regulatory systems will need to build their expertise to better cater for the more prominent role of SWFs," he says.

They will also have to stop seeing them as a "foreign" phenomenon with lessons in managing state-owned assets now as important in Washington as they are in Beijing. "What is the nationalisation of Freddie Mac, Fannie Mae and AIG other than the sudden formation of a very large block of state-owned enterprises?" Detter asks.

"In the space of only a few days, the United States went from being an observer and proponent of sovereign wealth regulation to a leading global owner of substantial sovereign assets.

"This new state of affairs could herald the beginning of a new order, particularly in the financial sector."