For now, at least, Asia is being regarded differently from its reputation of previous years. Some investors believe that Asia bears a lower risk than the developed world. Elsewhere people and governments appear to have borrowed too much and lived beyond their means.

“Five years ago people talked about risk premiums and at what level those premiums should be. Nowadays investors wonder if there should be a risk premium at all for Asia,” says Joseph Ferrigno, managing partner of Asia Mezzanine Group, a firm which caters for investors who like receiving both income and a greater level of downside protection. He was speaking at a UBS forum in Hong Kong yesterday.

Investors are becoming attracted by higher double-digit growth rates in Asia compared with single-digit growth figures elsewhere. Investors are still under-allocated to Asia and there has been less damage to capital invested in Asia than in the US, for example, given the destruction of capital in the banking system.

The hottest hands of all in private equity right now are operating in China. Chinese businessmen see entrepreneurs within their biz-network taking investor money into their funds or companies, and they want a piece of the action.

The emergence of RMB denominated private equity firms has fuelled the market, and that is a sign that the Chinese government is giving the thumbs up to private equity coming from domestic sources as well as international.

While bank lending persists, according to panellists at the forum, Chinese banks are lending to SOEs not to SMEs, and if they do lend, it is for working capital, not growth capital. That means there is room for private equity to find investments, and therefore they are clustering like flies around a cow’s rump.

“But there’s a big difference between announcing a fund and raising money for it,” says Jean-Eric Salata, chief executive and founder of Baring Private Equity Asia. “Then there’s a similar difference between raising money and putting it to work, then finally there is a difference between putting it to work and getting returns for investors on it.”

In China there are not enough experienced general partners (i.e private equity managers who know what they’re doing). Ferrigno estimates that just 5% of the 1,457 launched RMB funds might be ones with whom he’d feel comfortable doing business.

One question being asked by investee companies -- especially when that investee has a choice about where to accept money from -- is ‘what is your post-investment value-add?’  It is not just a case of showing up with money, especially where you are going into, say, a growth capital deal in which the private equity player enters as a minority shareholder.

Here the private equity firm might be expected to help improve operations, and thereby increase operating and net margins. This means they want an investor which can secure a better valuation upon their ultimate exit.

You have to assume that being able to offer a really, really fat cheque also helps.

The end-game for the bifurcated private equity industry in China is RMB convertibility, at which point the local currency and dollar private equity markets will come together and there is no separation between onshore and offshore private equity in China.

It will take years, five at least, before data on Chinese exits starts to percolate out, and until then we won’t know if private equity in China has been a hit or miss during this cycle.