...Combined sovereign wealth reached $3.5 trillion in 2007 -- the largest generator being China, according to the firm. Russia and Kuwait are next. And, according to recent news reports, two other countries with substantial population and/or wealth -- Saudi Arabia and India --are considering setting up sovereign wealth funds.

Douglas Rediker, co-director of the New America Foundation's Global Strategic Finance Initiative, noted that sovereign funds derive their assets from oil or trade imbalances that generate current reserves.

"Traditionally over the years, we and the IMF have been advocating that countries keep a significant amount of reserves to ensure they are protected from a rainy day. These countries did exactly what we and others advocated that they do," Rediker said.

But, he added, "at some point the reserves got so high" that the involved governments felt the need to diversify these reserves. As a result, "they are putting some of these into SWFs," explained Rediker... LINK