The European Private Debt Opportunity

29th September 2022   |   < 1 minute read

We are delighted to announce the publication of our latest research paper. This note: The European Private Debt Opportunity compares and contrasts the European and US Private Debt markets.

Private Debt has seen significant growth in Europe over the last decade; we believe it has established itself as an essential alternative investing asset class.

Following the 2008/9 Global Financial Crisis (“GFC”), banks, the traditional source of debt finance, faced significant balance sheet and regulatory pressures, resulting in their retrenchment from the sub-investment grade lending market. As Private Debt capacity has grown, Private  Debt funds have increasingly substituted liquid leveraged loan and high yield financings, particularly during periods of market volatility. At the same time, the demand for credit in Europe has been strong, primarily driven by a buoyant M&A market and significant amounts of Private Equity dry powder.

In addition to these attractive supply and demand fundamentals, the European Private Debt market has a number of attractive characteristics, particularly relative to the US market. We believe that the risk-adjusted returns available in the European Private Debt market, particularly for the larger players, are superior to the more mature and competitive US Private Debt market.

In our view, the rise of the Private Debt industry in Europe since the GFC is undoubtedly one of asset management’s greatest success stories this century. We believe that, particularly in more volatile environments, European Private Debt offers a number of uniquely attractive characteristics when compared to US Private Debt, so long as managers continue to invest in robust businesses that will be capable of withstanding more difficult macroeconomic circumstances.

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