Alf Young on Thursday: It's not nationalisation as we used to know it. However, the Abu Dhabi Investment Authority�s decision this week to write a $7.5bn cheque to the troubled US banking behemoth, Citigroup, is part of an accelerating global investment trend.

It's not nationalisation as we used to know it. However, the Abu Dhabi Investment Authority's decision this week to write a $7.5bn cheque to the troubled US banking behemoth, Citigroup, is part of an accelerating global investment trend.

And that trend - the increasing financial clout of sovereign wealth funds - is troubling governments, many in the West, whose major businesses are on the receiving end of such attention.

ADIA invests on behalf of the ruling family in the capital of the United Arab Emirates, where less than a fifth of the 4.4 million population are UAE citizens. The huge current account surpluses this oil producer is managing to run up on the back of a near-record global price need a profitable home.

So, ADIA is ploughing some of the UAE's excess billions into convertible Citi securities. In the first instance these will pay an eye-watering 11% rate of interest.

Then, in 2010 and 2011, that paper will convert into Citi stock at only a little above today's depressed Wall Street prices. Abu Dhabi could end up Citigroup's largest shareholder with a near 5% stake.

The West's battered financial services sector is currently a favoured hunting ground for sovereign wealth funds seeking investment bargains. But their activity is on a much broader front than that. The Abu Dhabi National Energy Company recently spent $5bn acquiring PrimeWest Energy Trust of Canada.

Other Abu Dhabi funds have recently taken significant stakes in Sony and the US chipmaker AMD. Two other Gulf states, Qatar and Dubai, bought up almost half of London Stock Exchange. The Delta Two fund in Qatar came close to buying control of J Sainsbury.

In the past two years, such funds have done deals worth nearly $140bn. Thirty-seven of these deals were each worth $1bn or more. And as this wall of state money seeking a profitable home rises, the megadeals will just keep on coming.

And it's not just oil-rich Arab states that are ramping up this buying spree. Other government-backed investment funds in Russia, China, Norway and a growing clutch of smaller countries, such as Trinidad and Tobago, enjoying such burgeoning surpluses are turning sovereign wealth funds as a whole into a serious global force in investment.

Such funds have been around for a long time. Certainly from the 1950s when the Kuwait Investment Authority was formed. But as Simon Johnson from the International Monetary Fund points out, while as recently as 1990 they accounted, in total, for at most $500bn, collectively they now command funds of around $2.5 trillion.

On their current growth trajectory, sovereign growth funds could total $10 trillion by 2012. That's not far short of US GDP (currently around $12 trillion), but still some considerable way behind the global value of traded securities (some $165 trillion).

However, even at present levels, sovereign wealth funds are comparable in scale to the global hedge fund industry. A major player, likely to become even more significant in future. And that's what's worrying some leading politicians in the West.

When the China Investment Corporation, launched just this year with a mere $200bn at its disposal, puts $3bn of that into the flotation of American private equity group Blackstone and the China Construction Bank follows that up by sinking $1bn into ailing US investment bank Bear Stearns, the scope for a protectionist backlash is obvious.

After all, in 2005, the US Congress forced the Chinese state-owned oil company, CNOOC, to scrap its $18.5bn attempt to buy control of Unocal of California. And then it insisted Dubai Ports World sell off five port terminals on the US mainland acquired as part of its takeover of P&O.

US Treasury secretary Hank Paulson wants the IMF and the World Bank to draw up tough guidelines on how sovereign wealth funds are allowed to invest in assets in other sovereign states. French president Nicholas Sarkozy and German chancellor Angela Merkel have also voiced concern.

Even our own embattled Chancellor, Alistair Darling, has voiced concern. In October he told a meeting of the G7 in Washington that while Britain believes in liberal free trade, the growing number of sovereign wealth funds need to play by more transparent rules.

The fear is that such investment by the Gulf states, China, Russia and others becomes not just a search for decent financial returns but an interventionist tool of foreign policy.

Were, for instance, state-owned Russian energy giant, Gazprom, to activate its long-rumoured interest in acquiring Centrica, the parent of British Gas, it can expect a pretty dusty answer, especially when western interests in Russian oil companies have come under such intense pressure to renegotiate their stakes.

Now that China and Abu Dhabi are nibbling away at the ownership of Citigroup and some of the other big names of Wall Street finance, the doubts about what some sovereign wealth funds are really up to are bound to intensify.