US shut out of European private credit market closure

The European private credit market is showing signs of development and growth, according to a recent report by Moody's. This burgeoning sector is finally catching up to its more developed counterpart in the US.

Moody's report highlights the improvement in the European private credit market, which has been lagging behind the US in recent years. The lag, according to Moody's, can be attributed to regulatory and legal issues that have constrained its growth. However, deglobalization is driving greater independence from the US, leading to higher investments in the European private credit market.

Six of the largest fund providers account for 59% of total fundraisings in European private markets, tripling their market share since 2019. The Children's Investment Fund (TCI) led by Chris Hohn is a major player, with other leading European hedge funds seeing increased investor capital inflows in 2025. The market trend suggests a shift away from US markets and supportive fiscal policies in countries like Germany.

Reforms aimed at boosting the European private credit market have been implemented. These changes include freeing up capital from insurers for private debt, facilitating access to the securitization market, and lowering capital costs. Despite these efforts, Moody's suggests that the European private credit market should be subject to closer scrutiny regarding transparency, rising leverage, and concentration risks from the dominance of a few alternative asset managers.

The European private credit market has untapped market potential, and its growth is due to factors other than regulatory and legal issues. Moody's identifies the market as a growing sector, inferring from the fact that they are reporting on its growth and catching up to the US market.

As the European private credit market becomes more competitive with the US market, it presents exciting opportunities for investors and asset managers alike. However, it is crucial to remain vigilant and address the issues of transparency, leverage, and concentration risks to ensure sustainable growth and stability in the long run.