European private real estate credit is capturing heightened interest from US institutional investors at a pivotal moment in the credit cycle.
From Zenzic Capital’s interactions with US LPs during the past 18 months, the consistent feedback is that European credit offers strong relative value and diversification from domestic markets. Relative value is largely a function of European capital market inefficiencies. Credit obeys supply/demand dynamics like any other good: When it is scarce, pricing and protections shift in lenders’ favour and vice versa.
European credit markets suffer from two structural dislocations that constrain supply.
Firstly, Europe does not function as a single capital market. Jurisdictions operate independently with limited cross-border lending. This reduces the capital base upon which borrowers can draw. Secondly, Europe remains heavily bank-reliant, with nearly 80 percent of private credit being bank-led. Banks tend to share tightly de
