European Private Credit Outlook: an alternative, not a solution

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European Private Credit Outlook: an alternative, not a solution

Global Research

7 July 2026ab

Global Strategy Global Strategy

GlobalEuropean Private Credit Outlook: an alternative,

not a solution Henry Morrison-Jones

Strategist

henry.morrison-jones@ubs.com

+44-20-7901 6656

Executive Summary Julien Conzano

Since late last year, we have been vocal about private credit risks as a potential catalyst Strategist

for broad-based spread widening, driven by weakening fundamentals and AI disruption julien.conzano@ubs.com

+44-20-7567 2067

risk. Discussions with clients have frequently highlighted the idea that Europe remains

more insulated to these risks. While we think that this may be true at the margin, it is not Matthew Mish, CFA

significant enough to justify an overweight for the region within global private credit Strategist

allocations, in our view. Instead, we find that European private credit portfolios are matthew.mish@ubs.com

+1-203-719 1242

similarly exposed to AI disruption risk, that quality has deteriorated at a similar rate to

the US, and that the spillovers from both European private credit into public credit and Sachin Ganesh

US private credit into Europe are underappreciated. We remain neutral between EU and Associate Strategist

US private credit on this basis and prefer to position for these risks by favouring EU HY sachin.ganesh@ubs.com

+1-212-713 1062

over LL and by buying protection on high-PC exposed banks globally.

Bhanu Baweja

We see similar levels of AI disruption risk in European private credit as in the US Strategist

bhanu.baweja@ubs.com

Loans to technology and business services sectors have accounted for ~50% of +44-20-7568 6833

European direct lending deals over the past three years, in line with US BDC loan