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Welcome to Taking the Credit, 9fin’s weekly observations on the issues affecting the European private credit market. To get these updates in your inbox each week, sign up here.
It was a conference of contrasts at IPEM Cannes (29-30 January) this week. Blooming sunshine soaked the Riviera town in excited January optimism on day one, while day two saw torrential downpours buffet the Palais des Festivals from dawn till dusk. A bad omen… or a sign that the M&A floodgates are about to open? It all depends on who you ask.
One thing is for sure — the gentleman selling umbrellas outside the conference has made a small fortune. Perhaps not the ‘wealth revolution’ IPEM had in mind for its shift this year to incorporating the wealth management ecosystem into its long-running private markets event.
New promises for private markets was the tagline of this year’s event, and promises-a-plenty there were. Hopes of renewed deal activity was (unsurprisingly) foremost on attendees’ minds, but key talking points also included the AI revolution and debate over the declining significance of ESG.
But first, the macro. Cautious optimism was the take away from Alix Partners’ survey of 158 GPs, released at the conference in collaboration with IPEM.
Reading the room
A slim majority of GPs (51%) are expecting a better global business environment this year, up from 44% at the start of 2024, according to the survey’s results. However, just 38% of GPs expect economic conditions to improve in Europe this year, as the continent suffers from weakening growth and a struggling manufacturing sector.
“We’re lagging behind the US and that gap looks set to keep growing,” one conference-goer told 9fin. “Things are improving globally, but Europe will face the brunt of any US tariffs and continued geopolitical unrest this year.”
With 40% of respondents fearing a major economic correction in 2025, the top three perceived threats were identified as geopolitical turmoil (24%), protectionism and trade wars (19%), and a slowdown in growth (16%).
This economic backdrop translates into only a mild boost in sentiment for conditions in private capital markets, with the majority of respondents expecting 2025 to remain a difficult year for exiting and fundraising.
Private debt, infrastructure, and real estate funds are more positive than the average private capital strategy, however — with more than 55% expecting it to be a good year for fundraising, over a 43% average.
And on the deal-making side, direct lenders are finding reasons to be optimistic.
“From the private credit perspective, significant asset flows into the US are driving a lot of the deal volume we’re seeing there. But in Europe, the fragmentation of private credit means asset flows aren’t as significant here and we still have a substantial amount of M&A,” an attendee said.
“At that point it comes down to asset selection. So I expect the macro environment we’re operating in globally will facilitate a lot of deal volume, even if the flows of capital aren’t directly coming our way.”
In terms of deploying capital, respondents are more positive heading into 2025 as well. Almost half (49%) of those surveyed think it will be easier to find attractive investment opportunities this year, up from 35% in 2024. The same is true for target valuations, with 44% expecting them to increase this year over 31% last year.
Attendees were keen to focus on improving capital markets activity as well.
“Borrowing costs are down significantly across the landscape. Triple B levels are at their all-time tights. Private credit spreads are down 150bps in the last two years,” one panellist pointed out. “So with costs coming down across the board, that’s making it a lot easier for private equity investors to raise capital as part of a buyout.”
ESG takes the back seat
A curious thread of conversation throughout the conference was a perceived decline in the importance of ESG metrics as relevant to investment decisions.
First, Alix Partners’ survey found that ESG is falling as an internal priority for many GPs at IPEM, with only 37% considering it a top priority this year compared to 57% in 2024. In contrast, IT management and succession planning are becoming more important.
Investors were torn as to why this is. “In the new Trump environment, is ESG really an important criteria going forward? Is it a number one priority, number two priority… or more like number 25?” one attendee snarked.
President Donald Trump’s recent order to remove the US from the Paris Climate Accord, among many other actions, has signalled his administration’s disregard for climate-focused regulation. And it would seem the sway of the presidency has far-reaching influence.
“We would never favour ESG at the expense of returns,” another said. “DPI. DPI. DPI. We want DPI.”
Others were less frank. “I think ESG is becoming part of the new normal, so it’s less of a top priority when looking ahead to the future,” a speaker said. Currently, 76% of GPs surveyed by Alix at IPEM use ESG metrics, 46% use carbon footprint analysis, and 33% use social impact assessments.
“If you look at the macroenvironment, firms have a lot more pressing concerns than ESG right now. Even if managers won’t say it, I think the arrival of Trump has served as a blessing to push ESG aside, at least in the short-to-medium term,” another attendee said.
AI evolution
The ever-burning hot topic of AI was unsurprisingly fervent at IPEM this week, given the turmoil Chinese language model DeepSeek brought to equity markets on Monday (27 January).
“Notwithstanding the news of the past few days, AI continues to be an area where we see very strong secular, long-term trends driving it,” a panellist said. “Power will be a huge part of its growth going forward, and we see monumental opportunities in both traditional power and the energy transition to invest behind.”
Another added: “We prefer to invest in the services around AI rather than directly into those developing large language models — it’s safer to invest in pickaxes and shovels during a gold rush than dig yourself.”
While much has been said on how AI will affect different industries and their potential investment opportunities, attendees also wanted to discuss how the technology could change the very nature of private market investing itself.
One fund of funds manager spoke of how they are trying to “integrate AI into a lot of their decision-making”.
“We’re spending a lot of time building up our internal generative AI capabilities now,” a GP said. “Not only in our portfolio companies but also in our own decision-making. We have a few exciting new projects to announce there next year.”
Private credit pipeline
Although a busy conference week for 9fin’s private credit team (you can check out our DealCatalyst wrap here), the deals kept coming.
In the UK, ICG and CD&R are vying over Blackstone’s 30% stake sale of marketing firm HH Global, with banks and private credit funds pitching competing packages to finance a deal.
