The Asian Development Bank is taking “material risks” by investing more money in private equity funds, even though internal controls on such investments show “serious weaknesses”, according to a confidential report by the Asian lender’s evaluation unit.

The ADB has accelerated private equity fund (PEF) investments since 2003 and now has stakes in about 40 funds. Many of the funds are registered in tax havens such as the Cayman Islands, but slightly more than half of the ADB money they have invested is in China and India.