By Sonja Cheung

AFP/Getty Images
A trader on the floor of the Hong Kong stock exchange last May reacts to bad news out of Europe.

Like a knight in shining armor, private equity has come to the rescue of some U.S.-listed Chinese companies that have taken a bashing after allegations of accounting fraud and corporate governance problems, undermining shareholders’ confidence.

Private equity investors have been buying into these companies because of cheaper valuations compared to their private mainland-based counterparts – but beyond that, the strategy of taking them private, restructuring and then re-listing them closer to home is fraught with challenges, according to industry experts. Typically, PE firms may have to contemplate drawn-out returns as they face hurdles like conducting careful due diligence and dealing with underperforming Asian public markets.

As one industry expert said, there’s “no safe bet.”

PE players active in this field include Hong Kong-based PAG Asia Capital, which helped wireless communications business Funtalk China Holdings Ltd. complete a management buyout about a year ago in a deal that valued the company at around $430 million. According to a Roth Capital Partners’ report, 14 out of 33 Chinese companies that are publicly traded in the U.S. have been taken private.

Read the full story in Private Equity Analyst (subscription required).

Write to Sonja Cheung at sonja.cheung@dowjones.com. Follow her on Twitter at @SonjaCheung