European Private Credit: Still an All-Weather Asset Class

This report reaffirms the long-term viability of the European private credit asset class, arguing that market concerns regarding AI, defaults, and systemic risks like the GFC are largely overstated or misapplied to the sector's specific fundamentals.

Key Takeaways

• 1.The 'all-weather' investment thesis for European private credit remains robust due to sustained demand, constrained bank supply, and a persistent illiquidity premium.
• 2.Incidents like First Brands represent structural 'category errors' rather than systemic distress in the sponsor-backed direct lending market.
• 3.AI presents a manageable, long-term credit risk rather than a systemic threat, with impact remaining gradual and uneven across software borrowers.

Table of Contents

• Introduction
• First Brands/ Tricolor: A Category Error, Not "Cockroaches"
• Will AI Disrupt Private Credit?
• BDCs: Sentiment vs. Data
• Is Private Credit the Next Global Financial Crisis?
• Conclusion

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