Jan. 24 (Bloomberg) -- Leaders of world finance told the holders of $2.5 trillion in sovereign wealth funds that they need to reveal more about their activities or risk further antagonizing American politicians.

In a meeting in Davos, Switzerland, that included chief executive officers James Dimon of JPMorgan Chase & Co., Lloyd Blankfein of Goldman Sachs Group Inc., John Mack of Morgan Stanley and Stephen Schwarzman of Blackstone Group LP, representatives of government-controlled investment funds from Kuwait, Saudi Arabia, Malaysia, Russia and South Korea heard that ``Washington'' would demand more disclosure if they didn't provide it, according to a person who was in the room.

The session yesterday at the World Economic Forum was closed to the press and public. The funds have invested at least $59 billion in the past year to shore up the balance sheets of such Wall Street banks as Citigroup Inc., the biggest U.S. bank, and Merrill Lynch & Co., prompting U.S. legislators to call for them to show more openness.

``We were talking trillions and trillions of dollars in sovereign wealth funds,'' said Rahul Bajaj, chairman of Bajaj Auto Ltd., India's second-largest motorcycle maker. He said that when the U.S. banks asked for ``more transparency, the Middle East said, `What do we need that for?'''

The 75 to 100 people seated in chairs around a circle at the Davos conference center yesterday mostly explained each others' points of view, according to the participant, who declined to be identified.

Why Now?

With the exception of Norwegian Finance Minister Kristin Halvorsen, whose fund publishes its investments and holdings on its Web site, representatives of the government investment vehicles responded to the call for more disclosure by saying they had been in business for as much as 25 years and didn't understand why new information was needed, the person said.

For the first time in its 37-year history, the World Economic Forum included a panel session on sovereign wealth funds today, at which some of the themes from yesterday's private meeting were reprised. Bader al-Saad, managing director of Kuwait Investment Authority, Muhammad Al-Jasser, vice governor of the Saudi Arabian Monetary Agency and Russian Finance Minister Alexei Kudrin resisted calls for a code of conduct to head off attacks by U.S. lawmakers.

Cart Before Horse

``It's putting the cart before the horse,'' Al-Jasser said, questioning why the funds should be seen as a ``danger.'' ``It's like the sovereign wealth funds are guilty until proven innocent.''

Former U.S. Treasury Secretary Lawrence Summers, also speaking on today's panel, said the funds raised questions about corporate governance, multiple motives such as their own national development and potential abuse of political influence.

There is concern in Congress as well. Senator Christopher Dodd, a Connecticut Democrat, told reporters in Washington yesterday ``we must remain vigilant that such investments are consistent with our national security and economic growth.''

Democratic presidential candidate Hillary Clinton said on Jan. 15 that she is ``very concerned'' about the funds' lack of disclosure. ``We've got to know more about them, they've got to be more transparent,'' the New York senator said during a debate in Las Vegas.

Implications Requested

When Schwarzman's Blackstone last June sold $3 billion of stock to China's soon-to-be formed State Investment Co., Senator Jim Webb, a Virginia Democrat, asked the U.S. Treasury, the Securities and Exchange Commission and the Homeland Security Department to investigate ``national-security implications'' of the deal.

That concern was acknowledged at the meeting, said Russia's Kudrin, who oversees the country's Stabilization Fund and spoke to the group.

``There have been talks as to whether there should be restrictions on these funds,'' Kudrin told Bloomberg Television later. ``I don't support such fears. Attempts to limit such investment bring far more risks today than the sovereign funds themselves.''

Sovereign wealth-fund assets may more than quadruple in value by 2015 to $12 trillion -- equal to the current capitalization of the Standard & Poor's 500 Index -- from about $2.5 trillion now, according to Morgan Stanley. It predicts the funds will have assets of $28 trillion by 2022, more than double the size of the U.S. economy.

Code of Conduct

At today's panel, Lehman Brothers Holdings Inc. CEO Richard Fuld called for a code of conduct for all investors rather than singling out sovereign funds. Schwarzman said it is ``almost amusing to see pools of capital that we've dealt with forever in a normal way have a new name called sovereign wealth funds where they're supposed to be an inherent threat.''

Secretary of State Condoleezza Rice endorsed the idea of a neutral or multilateral group developing principles related to sovereign wealth funds.

``The United States remains open to investment from around the world,'' Rice said in an interview with CNBC. ``As long as the transactions are based on economic principles, they should go on.''

Norway's Halvorsen also said a code of conduct would be ``beneficial.''

After the private meeting yesterday, she told Bloomberg Television: ``I think the audience in general, they don't really like the sovereign wealth funds, but they need the money.''

David Rubenstein, co-founder of the buyout group Carlyle Group, said it was wrong to criticize the funds.

``I don't think it's fair to criticize the sovereign wealth funds for buying stakes in these firms when they were asked to do so,'' Rubenstein said. ``They weren't knocking the doors down, it was the other way around. You can't criticize them for taking these terms when at the same time you need the money.''

To contact the reporters on this story: Yoolim Lee in Davos at yoolim@bloomberg.net A. Craig Copetas in Davos at ccopetas@bloomberg.net

Last Updated: January 24, 2008 17:26 EST