The amount of money sitting in sovereign wealth funds grew in 2009. As financial markets around the world recovered from the severity of the financial crisis that struck in September 2008, the coffers of these unique financial entities swelled to $3.51 trillion, according to the latest research from the alternative investment analysts at Preqin.

Nonetheless, some funds did experience withdrawals by their respective governments. In some cases, governments used sovereign wealth fund assets to close budgetary gaps.

China Investment Corp. (CIC), a sovereign wealth fund responsible for managing China's foreign exchange reserves, has disclosed to the SEC that its holdings in major U.S. companies now total $9.6 billion. According to reports, the fund totals nearly $2.5 trillion. Using that capital, and acting as a passive investor, CIC is buying minority positions in major companies. The stakes that CIC holds in major U.S. corporations represent small pieces by percentage, but the total investment to date is worthy of note.

Manufacturing.net has reported that CIC has disclosed the following: "... small holdings in dozens of companies including, $353.8 million in Visa Inc., $6.3 million in Apple Inc., $9 million in Coca-Cola Co. and $1.4 million in Goodyear Tire & Rubber Co. It also listed a $1.7 billion stake in Morgan Stanley." It should be noted that these are all minority holdings in publicly traded companies. Beijing is intentionally avoiding investments that might be deemed politically sensitive.

In a case of buy low, sell high, Kuwait's sovereign wealth fund just unloaded its $4.1 billion stake in Citigroup (C). In doing so, the fund scored a $1 billion profit -- and a 37% rate of return on its investment -- according to the Kuwait Investment Authority (KIA).

The fund invested in Citigroup in January 2008, before the financial industry came to the brink of collapse last year, but well after the impact of the mortgage crisis had been identified. The fund also invested $2 billion in Merrill Lynch, which was acquired by Bank of America (BAC) in September 2008.

Its sights set on the United States and Asia, South Korea's $30 billion sovereign wealth fund is hunting for equities. Korea Investment Corp. (KIC) doesn't see bonds outperforming stocks over the long term, which is what has prompted the move.

Once the reallocation is executed, equities will account for half of KIC's "traditional" investments. Today, it stands at 40%. High quality equities and fixed income securities comprise 90% of KIC's portfolio, with the rest, one would gather, consisting of "non-traditional" investments.

Back in 2007 -- at the height of the private equity bubble -- the Chinese sovereign wealth fund, China Investment Corp. (CIC), agreed to invest $3 billion in Blackstone (NYSE: BX). Of course, it was a disaster. In all, the investment lost roughly two-thirds of its value.

Despite all this, it looks like CIC hasn't given up on Blackstone. In fact, according to a piece in the Wall Street Journal, CIC is prepared to invest $500 million into a Blackstone hedge fund vehicle.

Jonathan Miller, the former chief executive of AOL, is apparently trying to raise money to buy Yahoo! Inc. (NASDAQ: YHOO).

The Wall Street Journal is reporting that Miller has been talking to the only people who have any money left to invest right now, deep-pocket private equity investors and sovereign wealth funds. Miller would like to purchase the whole Yahoo! enchilada at $20 to $22 per share, for a total value of $28 to $30 billion.

Yahoo! stock is spiking on the report. As of 1:15, Yahoo! is trading at $11.74, up 9% on the day.

Last week, Zac Bissonnette wrote about the fact that Carl Icahn has recently increased his stake in Yahoo! Icahn bought nearly seven million more shares in the company last week, raising his stake in Yahoo! to roughly 5.5%. Is it possible that a buyout led by Miller is part of Icahn's plan?

Whatever the backroom maneuverings, there is a lot of skepticism about any kind of Yahoo! deal, no matter who leads it. Financing such a big deal would be mighty difficult in this market, and Yahoo!'s valuation remains in flux. So you should probably take the news as reported: people are talking about a deal for Yahoo! but no deal is in place.

When the global markets entered the credit crunch, sovereign wealth funds (SWFs) funneled billions of dollars into a variety of struggling companies, especially financial institutions like Citigroup (NYSE: C) and Merrill Lynch (NYSE: MER).

Alas, the transactions have shown tremendous losses.

True, SWFs are focused on the long-term, which may extend into decades. But the extent of the losses were certainly jarring.

So are SWFs backing off? Perhaps not. In fact, these funds are starting to write checks again. For example, the Qatar Investment Authority structured a $8.83 billion dollar capital infusion into Credit Suisse Group (this is according to the Wall Street Journal, a paid publication).

Interestingly enough, China Investment Corp. may even pony up more money into the Blackstone Group LP (NYSE: BX), even though it has sustained losses of more than 70%. The SWF now has the right to boost its equity stake from 9.9% to 12.5%.

While it's true that SWFs tend to invest early, the recent activity is nonetheless encouraging – and another sign that major investors are getting more and more confidence.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.

Reuters reports that Merrill Lynch (NYSE: MER) is taking an enormous $5.7 billion write-down on losses from mortgage-backed securities (MBSs) and plans to raise $8.5 billion.

The biggest shocker was, as Reuters reports, that Merrill signed a contract with Singapore's Temasek, a sovereign wealth fund, that requires Merrill to pay $2.5 billion under terms of a previous stock sale to Temasek, along with $2.4 billion in required dividends to preferred shareholders. That's because under its previous deal, Merrill had agreed that if it sold shares at too low a price in the future, it would reimburse investors. Temasek has agreed to purchase $3.4 billion -- or 28% of the new offering. In other words, Merrill is paying an extremely high price for its capital.

The second shocker was how much of a write-down Merrill is taking on its portfolio of collateralized debt obligations (CDOs). Private equity fund Lone Star is paying 22 cents on the dollar, or $6.7 billion for CDOs with a stated book value of $30.6 billion. At that rate, the holders of $2 trillion worth of CDOs outstanding earlier this year would need to take a $1.56 trillion haircut if they sold all the CDOs. And I don't think they have nearly enough capital to be able to afford that.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Traditionally, sovereign wealth funds (SWFs) have focused on highly liquid investments, such as equities and bonds. But as these funds get bigger and bigger, the focus has been changing. In fact, some SWFs are moving into alternative investments and even buying up whole companies.

Take Dubai World, which is the emirate's SWF. This week, the firm teamed up with OAO Roskommunenergo (a Russian energy player) to bid $5.34 billion for OGK-1, which is a major electricity provider in Russia.

It's a savvy move. After all, Russia is in the process of deregulating the electricity market, which should come into effect by 2011. So there should be some pricing opportunities (keep in mind that prices have been held artificially low for decades).

Even so, OGK-1 has its challenges. Essentially, the company needs some serious capital infusions. But hey, that's something Dubai World can deal with handily, right?

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Lehman Brothers Holdings (NYSE: LEH) has approached a Korean sovereign wealth fund (SWF) about investing. But Lehman probably won't get the money it seeks. Reuters reports that Korean Investment Corp (KIC), an SWF that manages about $20 billion and is an investor in Merrill Lynch (NYSE: MER), is unlikely to invest in Lehman.

Meanwhile, Bloomberg reports that investors on the Einhorn side of Lehman -- those hoping its stock will drop -- are increasing their wager. It notes that options traders increased their bearish positions to a two-month high yesterday. With one analyst expecting Lehman to report a second-quarter loss of 50 cents a share during the week of June 16, put option volume rose to 283,676 contracts, or quadruple the 20-day average, and bearish bets on the company exceeded bullish ones by 1.6-to-1.

As I mentioned during my talk at Stanford in April, SWFs have been burned by their investments in the U.S. finance industry. One of them, the Citic Group, was lucky it was able to bail out of its commitment to invest $1 billion in Bear Stearns. But that close call is likely to keep other SWFs from throwing good money after bad.

Just a year ago, if you mentioned "sovereign wealth funds," you probably would have gotten a blank stare. But, of course, this is now the hot thing in finance. More importantly, it looks like sovereign wealth funds are poised for strong long-term growth. In fact, Lehman Brothers (NYSE: LEH) recently set up a division to capitalize on the mega trend.

Sovereign wealth funds are found in many countries in Asia, Africa, Europe and the Middle East. It's the inevitable consequence of some major forces: strong economic growth in emerging economies, the fall in the US dollar and spikes in commodities prices, especially oil.

Global Insight, a research firm, estimates that sovereign wealth funds have grown an average of 24% per year for the past three years. They have about $3.5 trillion in assets, which is more than private equity and hedge funds combined.

No doubt, sovereign wealth funds have become a key element in global finance. For example, they contributed to about 28% of M&A deals (in January 2008) and about 10% of private equity transactions.

Global Insight forecasts that – by 2015 – sovereign wealth funds will exceed the value of the GDP of the US economy. And, I'm sure, the funds will also own a big chunk of it as well.

Tom Taulli is the author of various books, including The Complete M&A Handbook (www.mergerbook.com) and is also a principal in Averiware, which provides an ERP system to small and midsize businesses.

Every hour, the U.S. spends about $100 million on oil. Of course, a big chunk goes to the Middle East, and ultimately, into sovereign wealth funds.

Although far from exact, it looks like sovereign wealth funds have about $3.5 trillion in assets, which is more than private equity and hedge funds. In other words, this is a huge opportunity for Wall Street.

Well, Lehman (NYSE: LEH) is taking advantage of this opportunity and is setting up a sovereign wealth division, with Makram Azar, who is an M&A maestro (in the global media sector), as its chief. He will set up shop in Dubai, the center of the universe for sovereign wealth funds.

This week on CNBC, Azar talked about his new role. Basically, he'll be developing a platform to help sovereign wealth funds diversify their bulging assets into commodities, minority investments, hedge funds, real estate and so on.

It will mean lots of coordination among the divisions of Lehman, but more importantly, if things work out, it could be a much-needed source of fees.

Tom Taulli is the author of various books, including The Complete M&A Handbook (www.mergerbook.com) and is also a principal in Averiware, which provides an ERP system to small and midsize businesses.

Sovereign Wealth Funds (SWFs) -- the $3 trillion worth of capital managed by countries to invest their oil or foreign exchange profits -- got quite a bit of attention earlier this year when they bought big chunks of the U.S. finance industry. But yesterday at a conference at Stanford, a Fed official suggested, without officially saying it, that despite their big wallets, SWFs are not the brightest investors on the block.

I spoke on a panel regarding SWFs at the Forum for American/Chinese Exchange at Stanford (FACES). I was joined on the panel by Brad Setser of the Council on Foreign Relations and Reuven Glick of the San Francisco Federal Reserve. I suggested that China, which in June 2007 bought a big stake in Blackstone Group (NYSE: BX) (for reasons I discussed here) may not have even read the prospectus before buying a $3 billion stake. If China had read the prospectus, it could have saved itself the embarrassment of what is now an investment trading 46% below its purchase price.

During our panel discussion, Glick unofficially argued that if China or any other SWF wanted to make an investment in a U.S. company, they were welcome to do so. He noted that in retrospect, China might be viewed the way Japan was when it famously overpaid for Rockefeller Center and Pebble Beach in 1989. Both investments were subsequently sold at a loss. When I summarized Glick's remarks: "So the Fed thinks that China is a greater fool." He smiled and said, "I didn't say that."