Private credit is growing again in Europe following two years of lower M&A activity and capital deployment, Fitch Group says, while fundraising has recovered from a Q2 slowdown.
The firm’s cross-sector update report on the asset class said private credit was becoming more interconnected with parts of the financial system including banks, insurance companies and, increasingly, individual investors – and could be “a meaningful transmission channel in the event of a broader economic stress with materially increased default rates”.
Europe-focused private credit funds raised $59bn in the first nine months of this year, up from the $45bn recorded in 2024, according to Preqin data – despite a slowdown in the second quarter of 2025 Fitch said was caused by macroeconomic and interest rate uncertainty.
That improved 2025 performance has included hefty fund closes such as the €17bn Ares Capital Europe Fund VI, $17bn ICG Senior Debt Partners Fund V and CVC’s €10.4bn Direct Lending Fund IV.
Fitch’s report said, “Meanwhile, smaller managers and funds face longer fundraising cycles and more downside risk, creating a barbell between very large platforms and niche and specialist strategies.”
The report added that European private debt deal activity had remained strong in recent years despite a more challenging fundraising environment.
Deal numbers rose by 46% in 2024 from 2023, with a CAGR of 11% from 2017 to 2024, according to the Deloitte Private Debt Deal Tracker.
Fitch said, “Higher deal volumes amid softer fundraising reflect managers deploying existing dry powder alongside stronger refinancing and M&A (particularly bolt-on acquisitions) activity, and private debt’s expansion into larger deals, combined with the syndicated market’s reopening.”
Private credit activity continues to be closely linked with private equity, the report added, with borrowing companies sponsored by private equity firms in about 70% of private credit deals, according to the IMF.
The private credit market continues to be dominated by North America, however, with Preqin expecting European private credit AUM to grow by an annual average of 12% until 2030, below an expected 14% in North America.
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