More than half of private equity investors plan to put more money in emerging markets, expecting higher returns from deals in these economies than ones in sluggish western markets, a survey found.

Some 57 percent of investors expect to increase allocations to markets including China, India and Brazil over the next two years, said a survey released Monday by private equity firm Coller Capital and the Emerging Markets Private Equity Association (EMPEA).

Investors are clearly drawn to markets with strong underlying growth, which trumps leverage in driving returns, said EMPEA President and Chief Executive Sarah Alexander.

Advent International last week said it had raised $1.65 billion for deals in Latin America, and Carlyle said it had raised $2.55 billion for Asian investments, bucking tough fundraising conditions to beat previous fund sizes.

Many investors see emerging market investments outperforming European and U.S. markets. Over three quarters expect emerging market net returns to exceed 16 percent over a three- to five-year period, compared with 29 percent seeing similar returns from their global portfolio, the survey found.

In a number of these markets, particularly China, India and Brazil, the environment has changed; there's more stability, there's better governance, there are more factors allowing for those returns to be generated, said Coller partner Erwin Roex.

A fifth of investors expect emerging markets net returns to exceed 25 percent, a figure in keeping with returns from European and U.S. buyout firms during the buyout boom.

Over the long term, markets which are growing at 7, 8, 9 percent are going to provide a more exciting environment for outperformance, said Richard Laing, chief executive of British Government-backed emerging markets investor CDC Group.

As Western economies edge back into growth, China last week posted stronger than expected annual growth of 11.9 percent in the first quarter. India, meanwhile, is expected to grow 8.5 percent in the current fiscal year.

CDC Group, which reports its full-year results Tuesday, has seen performance rebound in 2009, Laing said. The group's portfolio lost 13 percent of its value in 2008 as company valuations fell.

While perceptions of better returns are pushing investors into emerging markets, they also now realize that debt-laden deals in Western markets carried higher risks than previously assumed, Roex said.

(Editing by Greg Mahlich)

China India Investment