Americans fear foreign funds may threaten economy

By Svea Herbst-Bayliss

BOSTON (Reuters) - The majority of Americans fear the U.S. economy and national security could be hurt if sovereign wealth funds, the investment arms of foreign governments, put more money into U.S. companies, new data show.

U.S. voters do not want these funds, which currently manage between $1.9 trillion and $2.9 trillion, to buy stakes in high tech firms, banks, oil and gas companies and ports, a study released on Thursday by the business advisory group Public Strategies said.

The poll found that 55 percent feel the funds would hurt national security and 49 percent said the funds would have a negative impact on an already slowing U.S. economy.

While Americans know little about these types of funds, their gut reaction is negative, said Dan Bartlett, a senior strategist at Public Strategies.

The public's fear stands in sharp contrast with Washington and Wall Street's more positive views as government officials and company executives agree that foreign investments can help American companies compete better. Financial giant Citigroup (C.N), for example, raised $12.5 billion from foreign funds this year alone after posting heavy losses last year.

Roughly 68 percent of the 1,000 registered U.S. voters who were surveyed last week worry that foreign governments would gain too much control over the market if they kept making more investments here.

The survey had a margin of error of plus-or-minus 3.1 percentage points.

"Americans are becoming increasingly isolationist in their thinking in these issues," Bartlett, a former counselor to President George W. Bush, said adding, "The more they learn about sovereign wealth funds, they worse they feel."

Nearly three in four voters, or 72 percent, of the respondents said they think the foreign governments are too secretive with their investments and don't say enough about their strategies or portfolios, the survey found.

A majority of Americans, or 56 percent, did not like that investment funds from Singapore, Kuwait and the United Arab Emirates have taken small stakes in banking giant Citigroup Inc.

They were also wary of investments from China, Russia and Hong Kong.

Even though sovereign wealth funds, which are expected to grow to manage $15 trillion, in the next eight years, have not yet generated many negative headlines, Bartlett said the mood could shift quickly, especially during an election year.

There was a sharp outcry over a 2006 plan by Dubai Ports World to buy an American company that manages its ports.

This year the rhetoric has become sharper with U.S. Senator Charles Schumer, a New York Democrat, hinting that legislation could be introduced to regulate these types of funds.

Bartlett said investment funds need to take aggressive measures that go beyond educating the American public to shine new light on what they do.

Currently most foreign investments in U.S. companies have been less than 10 percent, below the point where U.S. regulators would launch an investigation.

(Reporting by Svea Herbst-Bayliss, editing by Leslie Gevirtz)