Blackstone Inc. sees a $200 billion investment opportunity in European credit over the next 10 years, underscoring the region’s appeal to investors looking for alternatives to the US.
The continent’s improved fiscal and monetary backdrop as well as tailwinds in areas like infrastructure and defense make for attractive opportunities, the firm’s chief investment officer for credit and insurance, Michael Zawadzki, said on Bloomberg TV.
Blackstone Chief Executive Officer Steve Schwarzman said earlier this month the New York-based investment company plans to allocate $500 billion in total to Europe over the next decade. He joined executives from behemoths such as BC Partners, Permira and Brookfield Asset Management in talking up the case for Europe as global economic risks mount.
“In credit specifically, because there’s less capital here in Europe, we see excess spreads, we see lower leverage levels, that’s why we have been active,” Zawadzki said.
Asset-backed finance and infrastructure debt are still nascent in Europe, and those areas are expected to grow, Zawadzki said. For Blackstone, 2024 was the most active year yet in European private credit, he added.
Industry Regulation
With private credit booming in Europe, calls for regulation of the industry are becoming louder. S&P Global Ratings wrote in a report earlier this week that transparency and oversight would help strengthen investor confidence in the industry.
Zawadzki said, however, he is confident in the current regulatory set-up. Blackstone’s clients access private credit mostly via long-dated, closed-end funds, where there is a strong asset-liability match.
“Even in our vehicles that target individual investors, we have designed caps on liquidity, such that we match the risk that we have in the underlying portfolio,” he said. For Blackstone, “every dollar that goes into the private credit system actually de-risks the market,” he added.
Zawadzki acknowledged there’s a lot of “chatter” about trading in private credit. Apollo Global Management Inc. is working with JPMorgan Chase & Co., Goldman Sachs Group Inc. and three other banks to syndicate investment-grade debt on a broader scale, Bloomberg reported last month.
But investors come to Blackstone for excess spread and excess returns versus the public market, Zawadzki said. Trading might happen episodically, “but I don’t think it will be a huge trend.”
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