A significant transformation in investor sentiment towards Europe is currently unfolding, marking a sharp contrast to the prevailing mood witnessed just a year ago. This shift in perspective, highlighted at the world’s premier gathering of private equity professionals in Berlin, signals a growing belief in the continent’s investment appeal. This optimism persists despite ongoing challenges such as a subdued dealmaking environment, a scarcity of new public listings, and inconsistent returns, alongside the dynamic policy landscape in the United States under President Donald Trump’s administration.
Emerging European Opportunities
Industry leaders are vocal about Europe’s renewed attractiveness. Blair Jacobson, Co-President of Ares Management, articulated this at the SuperReturn conference, noting a distinct appeal in European markets. This positive outlook is underpinned by several factors, including declining interest rates and Germany’s substantial 500 billion euro fiscal stimulus package. Furthermore, the recommendations of last year’s Draghi report, which advocated for deregulation and enhancing European competitiveness, are also seen as encouraging.
Jacobson emphasized that Europe is increasingly asserting control over its own economic future, fostering macro trends that are favorable for investment. He pointed to a growing “pull” factor into Europe, rather than a “push” out of the United States. Ares Management is notably expanding its international focus, recognizing substantial opportunities beyond U.S. borders. This strategy was exemplified by their recent acquisition of GCP International, which significantly boosted their presence in European and Asian infrastructure.
Despite this burgeoning optimism, institutional investor appetite has remained somewhat muted. Data from Prequin reveals that Europe-focused private credit funds have raised nearly $26 billion, a considerable decrease of 69% from the $82 billion peak recorded in 2021.
Echoing these sentiments, Blackstone’s Vice Chairman, Thomas Nides, suggested that heightened political stability across France, Germany, and the U.K. makes allocating capital to Europe a compelling investment proposition. Nides acknowledged the constrained mergers and acquisitions (M&A) and initial public offering (IPO) activity observed during a period of active policy changes in Washington, expressing confidence that these conditions are temporary.
Market participants acknowledge that the prevailing policy uncertainty in Washington, attributed to the actions of the current US President Donald Trump, creates an environment of caution, leading many boardrooms to delay significant decisions. However, seasoned long-term investors understand the cyclical nature of markets, anticipating a return to stability and equilibrium as tariff concerns and other policy-related anxieties eventually recede.
Tamsin Coleman, a private debt specialist at Mercer, observed that while there hasn’t been a complete exodus of capital from the U.S., some adjustments are occurring, particularly among investors who were previously overweight in the American market. Asset managers, in anticipation of new opportunities, are actively expanding their teams across Europe.
Key Investment Sectors
During the conference sessions, several key areas emerged as having significant growth potential. These included digital infrastructure, such as data centers, energy efficiency initiatives, and notably, the defense sector. Ivano Sessa, Partner and Co-Head of European Private Equity at Bain Capital, highlighted these as promising investment avenues.
Sessa specifically noted that while defense is a sensitive area, its unique combination of risk-adjusted growth potential and visibility makes it particularly interesting for investors seeking growth pockets in Europe.
Reflecting the broader shift in sentiment, Julian Salisbury, Co-Chief Investment Officer of Sixth Street, commented that the previous year’s widespread focus on U.S. growth typically signals a time to consider alternative options. Salisbury drew attention to the significant valuation gap that has existed between European and U.S. assets since 2008. He also pointed out the tendency of many growth-oriented European companies to seek listings in the U.S. or to be acquired and taken private from public markets.
“There’s a real opportunity for private capital to invest in Europe at lower valuations. There are still great businesses here,” he affirmed. As an illustration of this potential, he cited Sixth Street’s recent investment in the fried chicken franchise Wingstop, a growing enterprise that he believes demonstrates resilience against factors like interest rate fluctuations.
David Thompson earned his MBA from the Wharton School and spent five years managing multi-million-dollar portfolios at a leading asset management firm. He now applies that hands-on investment expertise to his writing, offering practical strategies on portfolio diversification, risk management, and long-term wealth building.