As private equity investors scour the Asia and other new economies looking for returns, an international law firm that advises on the sector has warned of an emerging markets “crisis of expectations” if performance fails to deliver.

There are a total of 329 funds on the road focusing on Asia, seeking a total of $117 billion in aggregate commitments from investors, according to data from Preqin, the research firm. That number accounts for 20 per cent of all funds being raised worldwide, a record level, suggesting how Asia is seen as a hotspot for such investment.

However, Mark Spinner, partner in the private equity team at Eversheds, warned investors against over-optimism about emerging markets.

“Whilst there will no doubt be some winners and some investors will make good returns there is also a real risk of an equity bubble with returns failing to meet expectations where the perceived growth potential does not materialise. Any fund that tries to invest without a local presence, requiring long distance management of the portfolio, is in my view most likely to catch a cold,” Spinner said.

“Increasingly funds are being focussed on particular markets/economies where there is strong potential for growth.. The emerging markets (particularly the BRIC countries) fall into this category and as such a number of the established private equity players are setting up teams/funds to target these markets,” he said.

In Asia, Preqin’s figures showed that private equity boomed from 2003 to 2008 but was unable, even in this vibrant region, to escape the global credit crunch. Asia expanded sharply in importance as a private equity region. It accounted for an all-time high of 14 per cent of all funds raised worldwide in 2008, up from 5 per cent in 2003. Fund-raising fell in 2009, however, although latest figures point to a revival.