European direct lending assets under management (AUM) have hit a record $380bn (£284.3bn) – more than 70 per cent above the pre-pandemic average – as investor demand shifts back to Europe amid volatile US trade policy.
A new report from Pemberton Asset Management, produced in partnership with Said Business School at the University of Oxford, noted continued investor confidence in private debt, with global AUM reaching $1.6tn in June 2024.
Direct lending now represents over half of private debt’s global AUM and is achieving much faster growth than other private debt strategies, the report said, cementing its dominance within the wider sector.
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US president Donald Trump’s global trade war and changing tariffs has created extreme volatility in the world’s largest economy, prompting many investors to look to Europe for higher and more stable returns.
Furthermore, while Europe’s direct lending market is smaller than its US counterpart, European direct lending returns tend to be higher than those found in the US.
“The second edition of Pemberton’s European Direct Lending Report offers timely insights into the market’s evolution,” said Symon Drake-Brockman, managing partner at Pemberton.
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“Amid shifting US policies and tariffs, investor focus is returning to Europe. Trump’s agenda has prompted a pivot from austerity to fiscal stimulus across European governments, which we believe will drive growth.
“Europe’s mid-market, typically characterised by asset-light, highly agile companies, which have less exposure to US tariffs, and strong performance creates a compelling investment opportunity and reinforces direct lending as a cornerstone of private debt strategies.”
Tim Jenkinson, professor of finance at Oxford Saïd Business School, added: “Private debt has rapidly evolved into a vital component of global finance. In this second edition, we explore how direct lending continues to grow in importance – shaped by macroeconomic shifts, investor demand, and an increasing focus on regulation.”
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