New York: Venture Capital investment trends will make a major shift by 2012 as investors are looking outside their home borders-increasing their focus on ventures in India and China, according to Ernst & Young’s Global Venture Capital insights and trends report 2011.

A number of major changes will be experienced by the global venture capital industry in that time-ranging from global fundraising and cross-border investment, to exits on foreign stock exchanges or by foreign acquirer, to opening offices in more overseas locations and helping their portfolio companies’ access markets in new regions.

“Attracted by exceptional growth opportunities that require substantial funding, VC and PE investors are currently shifting their focus from ‘traditional’ VC and PE countries towards emerging markets,” said Maris Pinelli, Ernst & Young’s Global Vice Chair for Strategic Growth Markets.

Currently, only about 20 percent of the VC firms in Brazil, India, Israel and the U.K. invest outside their home countries. However, a majority of VC firms in Canada, France, Germany and the U.S. invest internationally. Of those VC firms investing outside their home countries, 57 percent plan to increase this activity during the next five years, while 35 percent plan to maintain their level of international investment, reports a June 2011 survey by the National Venture Capital Association.

Despite strong deal flow, market volatility has had an impact on the ability of even the best VC firms to raise new funds. The total capital raised by U.S. VC firms in 2011 reached to $16.2 billion, which is a 4.5 percent rise from the same period last year.

Where the U.S. VC industry is showing a growth, China has also succeeded in setting a record high in 2011 based on both value and number of investments. Due to its late-stage investment focus and new fundraising record, China is likely to surpass Europe as the number two venture hub globally by the end of 2012 based upon dollars invested.

India’s venture capital industry has also been particularly active and has been since 2006. In 2011, $1.5 billion was raised in 155 rounds, while in 2010 $1.1 billion was raised in 103 rounds. Over the next two years, India will see further VC investment coming from e-commerce, mobile applications, healthcare delivery, medical devices, financial inclusion, clean technology and IT.

The European VC industry showed signs of a tentative recovery after a particularly challenging 2009, though activity remains significantly below pre-crisis levels. In 2011, the industry suffered through some of the worst volume since 2004, as European fundraising fell 13 percent year-on-year, to $3 billion for 41 funds.