Sovereign wealth funds should adhere to a new code of conduct to avoid a "protectionist backlash" in countries that grow suspicious of their motives, the International Monetary Fund's No. 2 official.

In a speech in Santiago, Chile, IMF first deputy managing director John Lipsky urged government-run investment pools to accept "principles and practices" put forth by his organization. The guidelines would allow the funds to "reduce concerns and thereby help to mitigate the risk of protectionist pressure on their investments and restrictions on international capital flows," he said.

The IMF is at the center of a global debate about how sovereign funds manage their $2.5 trillion in assets, as oil wealth accumulates and officials in countries receiving their investments worry about national security. In his speech, Lipsky praised wealth funds for acting as "shock-absorbers" in capital markets over the past year, while cautioning that their practices need to be transparent.