Sovereign wealth funds went on the offensive for the first time yesterday defending their reputations as long-term investors and denying accusations they posed any threat to national security.

The Middle East and Asian funds have been the subject of intense debate at this year’s Davos, with delegates torn on whether their multi-billion dollar bailout of stricken US banks represents a threat or much-needed support for the ailing US economy.

Speaking at a standing room only debate in Davos yesterday, Mohamed Al-Jasser, vice governor of Saudi Arabian Monetary Agency said: “It's like the sovereign wealth funds are guilty until proven innocent."

“Are we creating a straw man before we destroy it? We have to be careful about that," he told a panel discussion packed with business and political leaders.

The funds’ assets are set to reach $12 trillion by 2015, almost 10 percent of all financial assets in the world.

But as they become more powerful, sceptics, particularly in America, have argued they might pose a threat to national security if they own stakes in strategically important assets. There are also calls for the funds to become more transparent and adhere to a code of conduct that will prevent them from potentially abusing their power as shareholders.

Several leaders including Mervyn Davies, chairman of Standard Chartered and David Rubenstein, founder of Carlyle – both of whom have sovereign funds on their register – have echoed calls for better transparency this week.

Bader M Al Sa’ad, managing director of the Kuwait Investment Authority (KIA), which was part of a group that pumped $6.6 billion into Merrill Lynch, said that there was no evidence that sovereign funds needed regulating.

He said: “We haven't been active in any of our (holdings). All this fear about sovereign wealth funds has no real basis... Why only sovereign wealth funds need to be regulated and not other large investors?"

Mr Al Sa’ad pointed out his fund had been making such investments for years. It first acquired its stake in German car maker DaimlerChrysler in 1969 and bought into BP in 1986.

“We look to the bottom line, we don’t look to anything else. We have been positive in all our investments”.

U.S. Deputy Treasury Secretary Robert Kimmitt denied Washington was scared of sovereign wealth funds. "At this point, the history with sovereign wealth funds is they are generating higher investment returns without generating political controversy," he said.

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