In our 2024 outlook, Hayfin argued that the European market offered one of the most attractive opportunity sets in private credit globally[1]. One year on, the evidence is even more compelling.

In the last six months, in particular, geopolitical risk and heightened trade tensions have accelerated a process that has been years in the making: institutional allocators looking beyond the US market to Europe, drawn by its unique market structure and comparatively untapped landscape. Once seen as a challenge, the continent’s fragmented financial ecosystem is now a source of competitive advantage for managers with local presence and scale.

Policy shocks and portfolio shifts

The reintroduction of extensive US tariffs on imports from trading partners around the world has reignited trade tensions and introduced fresh volatility into the global investment landscape – but particularly in the US and China. Even with these measures often having been quickly reversed or put on pause, they have raised inflationary concerns and complicated global supply chains, prompting allocators to reassess their geographic exposure.

A popular destination for that diversification is Europe, which, by contrast,offers a comparatively more stable political and regulatory backdrop. This divergence is already being reflected in capital flows. According to Preqin, Europe-focused private credit funds raised $25.7 billion in Q1 2025, nearly tripling the $9.3 billion raised by US-focused counterparts[2].

While North America still represents around 75% of private credit assets, this trend was the most common theme discussed at the 2025 SuperReturn Conference in Berlin.  At the private capital industry’s top convention, asset managers and allocators cited a deliberate move toward non-US private markets, with Europe emerging as a priority region. This momentum for European private credit has been accelerated by a move from allocators to rebalance away from private equity, given current overweighting and the challenges faced in that asset class.

Crucially, however, investors aren’t simply avoiding short-term geopolitical risk; allocators are increasingly drawn to the structural advantages and return potential Europe offers.As US markets become increasingly saturated, Europe continues to present a differentiated opportunity set that rewards selectivity, local presence and underwriting discipline.

Structural strength and strategic opportunity

At the heart of Europe’s appeal is its structural distinctiveness. The continent is heavily segmented and continues to be a bank relationship-oriented market[3]. As regulatory pressures persist under Basel IV and banks continue to pull back from the mid-market, private credit is stepping into a widening gap.

But what sets Europe apart is the quality of its deal flow, not just its availability. European private credit transactions typically offer a 50–150 basis-point margin premium over comparable US loans, often with tighter documentation and lower leverage than their US counterparts[4]. Recovery rates are higher, and default rates remain lower, supported by tested creditor-friendly legal regimes in jurisdictions such as the UK, Luxembourg and the Netherlands.

Finally, Europe’s complexity, its patchwork of languages, legal systems and market norms also creates a natural barrier to entry. For new entrants, clearly, that’s a challenge. For managers with deep regional networks and on-the-ground infrastructure, this fragmentation becomes a protective moat. It enables proprietary deal flow, differentiated origination, more nuanced risk assessment and greater control over structuring and execution.

While the US market becomes increasingly commoditised, Europe rewards regional expertise and scale. This differentiation is increasingly valuable in a global market where capital is abundant but high-quality opportunities are scarce.

The move to Europe is underway

The case for European private credit is no longer theoretical; it’s playing out in real time. As US markets grapple with policy-driven volatility and competitive saturation, Europe offers a less crowded, structurally attractive alternative.

For investors seeking resilient returns, downside protection and differentiated deal flow, Europe offers some of the most compelling opportunities in the market today.

REFERENCES

[1] Hayfin, ‘Why Europe? Market Considerations for Private Credit’, 23 May 2024

[2] S&P Global, ‘Europe-focused private credit fundraising outpaces US efforts’, 03 April 2025

[3] S&P Global, ‘Credit FAQ: How Private Credit’s European Expansion Brings Rewards And Risks’, 09 May 2023

[4] Hayfin, ‘Why Europe? Market Considerations for Private Credit’, 23 May 2024