June 5, 2012 / 2:27 AM / 5 years ago

Asia share of global private equity deals jumps: McKinsey

HONG KONG (Reuters) - Asia's share of global private equity investments has doubled to 21 percent in the past four years, helped by last year's strong growth and that figure should continue to rise, a top McKinsey & Co executive told Reuters.

That dramatic rise in Asia private equity volumes could signal a global shift in deal flows, with the industry in Europe and the United States still subdued in the face of debt worries and weak employment data, a new study by McKinsey showed.

"We're still punching below our weight in Asia, and we've got a ways to go to catch up to our share if you look at global GDP," said Bruno Roy, a partner for consultancy firm McKinsey & Co, which authored the report.

The region has 28 percent of global GDP which means there is room for further expansion, Roy said.

While investing in the first half of 2012 has been slow, global investors in private equity funds are continuing to show strong interest in the region.

Private equity investments for Asia in 2011 hit $65 billion, up 63 percent from a year earlier. China continued its dominance, capturing 45 percent of the region's private equity investments.

"There's a clear shift to dealmaking in Asia. We are close to 2006 levels and closing in faster on 2007, so we're coming out of the downturn faster in Asia," Roy said.

Despite growing concerns about billions of dollars of unused capital that private equity has stored in Asia for investments, the McKinsey report suggests there is little risk the region's markets will become saturated.

Private equity investments in 2011 in the US were equal to 1 percent of nominal GDP, but China, Asia's fastest growing market, has a penetration rate of just 0.4 percent, the regional average.

And while the tight credit environment has made fundraising tough even for Asia private equity funds, the same climate means there is more demand than ever for private capital, with distressed debt opportunities and restructuring deals likely to increase, McKinsey concluded.

Reporting by Stephen Aldred; Editing by Denny Thomas and Edwina Gibbs

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