UPDATE 2-3i minority investments sluggish as deals rise

* Growth capital deals 23 mln stg in first nine months

* New investments 510 million pounds in first nine months

* Company sales yield 398 million pounds

* Sales of Hyva and MWM expected to yield 350 million pounds

* Shares flat at 314.2 pence

(Adds analyst comment, finance director comment, shares)

LONDON, Jan 27 (Reuters) - British private equity firm 3i (III.L) has been slow to spend its new 1.2 billion euro ($1.6 billion) growth capital fund on minority investments, despite an increase in deal activity in the three months to end December.

The high level of competition for deals, leading to high prices, is encouraging some sellers to completely exit their stakes as opposed to seeking minority partners, finance director Julia Wilson told reporters on Thursday.

3i invested just 2 million pounds ($3.2 million) in growth capital deals -- usually minority stakes in fast-growing companies -- out of the 183 million total it invested in the quarter. Its shares were flat at 314.2 pence at 0900 GMT.

Over the first nine months, investments more than doubled to 510 million pounds, while growth capital investments fell 66 percent to 23 million pounds.

"We are surprised at how little activity there has been in the growth capital business," Oriel analyst Iain Scouller said in a note to investors. "This was expected to be a sector with better activity prospects compared to buyouts, following the change in debt markets over the past couple of years."

New buyouts picked up late last year as the economic outlook improved and M&A markets continued to warm up, with 3i agreeing deals for businesses including Nordic medical supplier OneMed and German jewellery maker Amor group.

3i has spent about 70 percent of its 5 billion euro buyouts fund.

New growth capital deals are coming through, however, and the group agreed to invest in Indian facilities management company BVG India earlier this week.

Asia is a core region for minority deals and competition is fierce. The need for good alignment with company management on such investments means it can take longer to reach agreement, Wilson said. "There is plenty of activity going on in that business line, it just takes a slightly longer time for completion to come through," Wilson said.

3i has also been active selling more mature portfolio companies, including Dutch hydraulic cylinders maker Hyva and French environmental and food testing firm Groupe Carso.

Sales of companies amounted to 398 million pounds over the nine months, not including 350 million of expected proceeds from Hyva and the sale of MWM to U.S. group Caterpillar (CAT.N) earlier in the quarter, compared with 777 million in the previous year. (Reporting by Simon Meads; Editing by Dan Lalor) ($1 = 0.6287 pound = 0.7296 euro)