While business is increasingly conducted on a global scale, the majority of U.S. venture capitalists are not investing in foreign companies, according to a new study.

The Global Venture Capital Survey -- a review of the investment habits of more than 500 venture capitalist and private equity firms around the world, sponsored by Deloitte and Touche and the National Venture Capital Association -- found that 46 percent of U.S. VCs currently invest in foreign companies. In addition, 66 percent of those with foreign investments have less than 5 percent of their capital invested abroad.

"The lion's share of venture capital firms are not going overseas," said Mark Heesen, president of the National Venture Capital Association, an Arlington, Va.-based trade group. "Overall they believe that at the end of the day the return on investment doing deals strictly domestically is greater than what they would make in a foreign market."

Heesen named good local deals, prohibitive costs to investing abroad, and a desire to be close to investments as the main reasons VCs tend to keep their capital in domestic markets.

One way U.S. VC money is reaching global markets is through U.S. firms with operations in other countries. Almost 90 percent of respondents said at least part of their portfolio included companies with significant operations outside the United States.

Some VCs also expect to increase their foreign investments in the near future. Of VC firms that currently invest in foreign locations, more than half said they will invest more abroad and nearly two thirds said at least 6 percent to 20 percent of their capital will be invested abroad in the next five years.

The top countries currently receiving U.S. capital investment are China, Canada, India and Israel. While China represents a huge potential market, Canada's proximity and stability make it an ideal location for investing, the survey found. The rising class of entrepreneurs in China and India is another appealing factor to U.S. VCs. On the other hand, there are still large challenges to investing in these countries, including China's failure to protect intellectual property and Israel's political instability, respondents said.

While many VCs find fault with the U.S. legal system and regulatory environment, Heesen said these obstacles aren't enough to send investments overseas.

"We certainly like to complain about some of our problems in the United States," Heesen said. "But compared to virtually any other place in the world, our entrepreneurial culture and our government are better for investors."


Correction: The original version of this story misspelled the name of Mark Heesen, the president of the National Venture Capital Association.