While international markets have more volatility and lower trust, their biggest advantage is inefficiency. Many basic services are underdeveloped, creating enormous 'low-hanging fruit' opportunities. Providing a great, reliable service in a market where few things work well can create immense and durable value.

Advent leverages Europe's fragmented landscape of 44 nations, each with unique regulations and politics. This complexity creates inefficiencies and transformational deal opportunities, like corporate carve-outs, which are less common in the more uniform US market.

The US corporate market is 75% financed by capital markets, while Europe's is ~80% bank-financed. This structural inversion means Europe is undergoing a long-term, multi-decade shift toward institutional lending, creating a sustained tailwind for private credit growth that is far from mature.

While the US private credit market is saturated, Europe's middle-market offers higher spreads (north of 600 basis points) and lower leverage. This opportunity is most pronounced in non-sponsor deals, a segment where large banks and public markets are less active, creating a lucrative niche.

The outlook for European credit is more negative than for the U.S. The region is more dependent on energy imports, lacks the AI-driven earnings momentum seen in the U.S., and faces a more aggressive ECB hiking cycle. This justifies forecasts for wider peak spreads and a slower recovery in Europe.

Loeb explains why more equity funds don't simply add a credit strategy. Credit markets aren't for "tourists"; they require deep, established relationships and infrastructure to access opportunities. This acts as a competitive advantage for firms like Third Point that grew up in that world.

Unlike US firms focused on rapid exits, many multi-generational European family businesses prioritize stability and privacy. They actively dislike the anonymity and disclosure requirements of public markets, creating a strong, relationship-driven demand for tailored private lending solutions.

Beyond immediate geopolitical pressures, a key structural weakness for the Euro was highlighted at the IMF meetings. The lack of a single, unified capital market in Europe limits its ability to scale up critical spending (like defense) and prevents the Euro from acting as a viable reserve currency alternative to the US dollar.

Large European banks are not absent from lending, but they prefer the simplicity and regulatory ease of large, portfolio-level financing over complex, single-company underwriting. This strategic focus leaves a significant funding gap in the €100-€400M facility size range for private credit funds to fill.