INTERNATIONAL. Billionaire investor Warren Buffett stepped into a debate about the emergence of sovereign wealth funds, saying the government-controlled firms are fueled by US spending overseas, not political motives.

"This is our doing, not some nefarious plot by foreign governments," Buffett, the chairman of Berkshire Hathaway, said yesterday in his annual letter to shareholders. "Our trade equation guarantees massive foreign investment in the US. When we force-feed US$2 billion daily to the rest of the world, they must invest in something here."

China, Russia and Dubai have deployed record central bank reserves to set up funds wielding as much as US$2.9 trillion. Firms from Singapore, Korea, Kuwait and Abu Dhabi bought stakes during the past four months in Citigroup Inc., the biggest US bank by assets, and Merrill Lynch & Co., the world's biggest brokerage. Officials from the US Treasury Department and the Securities and Exchange Commission have said there's a risk government-controlled funds may invest to achieve political, rather than commercial, ends.

"He's right that we're the ones that created the problem in the first place," said Mohnish Pabrai, who manages US$600 million at Pabrai Investment Funds in Irvine, California. "The U.S. is better off if foreign governments buy Treasuries, because we have a printing press for them, but if I were running China's money, I'd be buying U.S. companies, oil reserves, hard assets too."

"Both the growth in size and number of these funds is such now that vigilance is required,'' Deputy U.S. Treasury Secretary Robert Kimmitt said in a 27 February interview on Bloomberg Television. SEC Chairman Christopher Cox said in December that the state-run investment firms don't adequately disclose why they're buying stocks and other assets.

Earlier this year, US President George Bush issued an order to clarify procedures for a law strengthening national security reviews of foreign deals, and said the United States welcomed foreign investment.

The order came after a number of sovereign wealth funds, or government-controlled funds, agreed to take billion-dollar stakes in major US banks battered by the subprime mortgage crisis.

US Treasury Secretary Henry Paulson and his counterparts in Europe have expressed concern that lack of public knowledge about how these funds invest may roil financial markets.

The Group of Seven last month agreed that policy issues surrounding the funds must be 'measured'' while "remaining vigilant against protectionist sentiment," Paulson said in a 9 February press conference in Tokyo.

Buffett, 77, built Berkshire Hathaway over four decades from a failing textile manufacturer into a US$215 billion investment and holding company. The stock rose 29% in 2007 and about 4,700% in the 20 years through 31 December, six times more than the Standard & Poor's 500 Index, dividends included.

The feat made Buffett an icon to shareholders and investors.

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