While Europe continues to attract investors seeking attractive valuations and macroeconomic stability, M&G sees a fundamental shift occurring in the US capital markets: 75 percent of credit growth is now taking place through the private market—a structural transformation that is only accelerating.
Credit growth in the United States increasingly relies on the private market, at the expense of the traditional banking system. Andrew Chorlton, CIO of Fixed Income at M&G, emphasized during a media conference in London last week that private debt is growing three times faster than traditional bank lending—pointing to a fundamental, non-cyclical trend. This development is tied to a long-running shift that has accelerated since the 1990s: companies are increasingly seeking financing outside the traditional banking system. This trend has unfolded against a backdrop of low interest rates, greater financial sophistication, and a gradual retreat of the government from financing the real economy.
According to data presented by M&G in London, this new model has enabled US companies to remain off public markets for longer. The number of IPOs has halved, and the maturity cycles of both startups and mid-sized firms are extending within the private market. In turn, this has fueled an explosive increase in demand for private credit. Today, specialized funds are routinely involved in financing rounds for fast-growing companies.
Europe is changing
Unlike the United States, Europe still relies on bank lending for 75 percent of corporate financing, according to figures from the European Banking Federation. Private markets remain a relatively small part of business financing—less than 5 percent of GDP, according to M&G—hindering large-scale development.
But that is starting to change. Emmanuel Deblanc, CIO of Private Markets at M&G, notes that institutional European clients, including private banks, are showing increasing interest in illiquid European assets. This cautious signal points to a strategic reallocation toward vehicles capable of generating returns above inflation in an environment where real interest rates are struggling to stabilize.
The main obstacle remains the regulatory, linguistic, and legal fragmentation of the European market. Unlike the US—where Delaware law and a unified capital market create economies of scale—Europe still needs to harmonize its regulations (MiFID, SFDR, PRIIPs) to ease access to private credit for companies. Nevertheless, M&G points out that this “underdeveloped” market offers significant long-term opportunities, particularly in growth sectors such as green infrastructure, applied industrial technology, and energy transition services.
According to research firm PitchBook, private equity fundraising in Europe reached approximately 175 billion euros in 2024—a strong volume despite monetary tightening. This indicates the emergence of a more mature ecosystem, especially in financial hubs like Paris, Amsterdam, and Milan. The trend is further confirmed by growing demand. “Over the past few quarters, European private banks and family offices have been increasing their exposure to European asset classes, including in alternative segments,” says Emmanuel Deblanc.
Strategic repositioning
In this shifting landscape, allocators must choose between the flexibility of the US market—with greater risk in terms of transparency and liquidity of private assets—and the institutional stability of the European market, which is still nascent but potentially more robust.
Fabiana Fedeli, CIO of Equities at M&G, notes that when it comes to public markets, the historic investor preference for US stocks is increasingly being questioned: “US valuations are high, with an average price-to-earnings ratio above 19, while Europe hovers around 13.5. That historical discount is becoming harder to justify, especially in a period of macroeconomic slowdown.” She adds that many European companies are deploying AI on a broad scale, particularly within industrial value chains—creating fertile ground for alternative investors in search of qualified deal flow.
Finally, the political factor carries significant weight. The downgrade of the US credit rating in 2024 (AA+ according to Fitch), ongoing trade tensions, and Washington’s growing isolationism are all contributing to uncertainty. Andrew Chorlton summarizes it this way: “We have entered a time when political decisions are no longer guided by rational economic considerations. That is disrupting the global investment climate.” Emmanuel Deblanc takes it a step further: “The certainty of American stability is gone. We are living in a post-PG world.” A tongue-in-cheek reference to film ratings (“Parental Guidance”) to describe the haze in which investors now find themselves.