CVC Private Wealth - 2026 Private Equity and Credit Outlook

Quick Recap:

In 2025, markets advanced overall, however the investor experience did not always feel straightforward.

Headlines were dominated by tariff developments, geopolitical tensions and elevated volatility, with average market volatility reaching its highest level since 2022¹. Early-year uncertainty weighed on sentiment and briefly slowed deal activity.

Beneath this surface noise, however, the real economy showed signs of underlying strength. Inflation moderated, labour markets remained relatively firm and central bank policy became more accommodative, easing financing conditions.

In Europe, supportive fiscal policy further contributed to economic momentum, while interest in private capital continued to develop across both equity and credit strategies.

As the year progressed, early caution gave way to greater confidence, and 2025 ultimately became defined by one clear theme: resilience.

Looking ahead to 2026, these dynamics provide a more constructive backdrop for European private markets, even as geopolitical volatility is likely to remain a persistent feature of the environment.

In this setting, selectivity remains paramount, with Europe offering diversification benefits, relative value and sound underlying fundamentals for long term investors.

Private Equity 2026 Outlook

Global deal activity is expected to improve, although geopolitical volatility is likely to persist. In this environment, selectivity remains essential, with Europe offering meaningful diversification benefits.

Deal Activity: A Measured Global Pick-Up

• Global deal activity strengthened in the second half of 2025 as financing conditions improved and confidence returned, with Europe performing particularly well.
• This momentum is expected to carry into 2026, albeit at a measured pace and against a backdrop of ongoing geopolitical volatility.
• Financing visibility is improving as rate paths stabilise across central banks. In Europe, ECB policy rates appear to have reached equilibrium and remain below those of the Fed, supporting transaction viability.
• In parallel, structural initiatives aimed at reindustrialisation, energy transition and strategic autonomy are reinforcing growth prospects, generating incremental demand for private capital and specialist investment expertise.
• We believe Europe is well positioned within this environment. Supportive financing dynamics, a more constructive regulatory²  and fiscal backdrop, and exposure to strategic growth sectors continue to attract capital flows.

Valuations: Europe With An Advantage

• European buyouts typically trade at lower valuation multiples than those in the US, reflecting structural differences in how transactions are sourced and executed.
• Europe’s market is more fragmented adding a greater reliance on local, relationship-driven sourcing. Transactions are more frequently bilateral rather than auction-led, limiting buyer overlap and competitive intensity, supporting more disciplined entry pricing.
• By contrast, the US private equity market is deeper and more consolidated, with a larger pool of buyers and more consistently competitive auction dynamics, which tend to drive higher valuations and reduce the advantage of local expertise
• While interest from global investors in Europe is increasing, these structural characteristics are likely to persist in 2026, supporting continued valuation differentiation despite rising cross-border capital flows.

Private Credit 2026 Outlook

Europe enters 2026 with strong fundamentals and increasing regulatory clarity. Across M&A, refinancings, add-ons and selective buyouts, the opportunity set continues to broaden, favouring disciplined and selective underwriting.

Credit Quality: Structurally More Conservative

• European loans have consistently exhibited stronger interest coverage ratios than those in the US, and we expect this resilience to continue into 2026.
• Default rates in both regions remain within historic norms, despite intermittent market volatility.
• The European market retains structural characteristics that support credit quality: generally lower leverage, creditor-friendly restructuring frameworks and favourable documentation standards.
• Market behaviour also differs. Europe tends to show less tolerance for aggressive balance sheet engineering, helping preserve value for senior secured lenders.
• In this environment, selectivity is important. Partnering with local managers who combine disciplined underwriting with active portfolio monitoring remains a key differentiator.

Spreads: Europe To Continue Offering A Premium

• Europe continues to offer a structural spread advantage. This helps preserve attractive income opportunities even as more capital flows into the region’s private credit market.
• This premium reflects several long-standing characteristics of the European market. Continued bank retrenchment, driven by regulatory requirements, has created space for private lenders to provide fast, flexible financing solutions.
• At the same time, Europe’s fragmented markets require bespoke underwriting approaches, limiting competition and helping to avoid the uniform spread compression observed in the US.
• Capturing this advantage depends on strong local origination capabilities. Long-standing sponsor relationships and on-the-ground teams provide early access to high-quality opportunities, supporting stronger economics and more robust creditor protections.

Bottom Line

• Europe enters 2026 with robust fundamentals and improving macro visibility, supporting a broadening opportunity set across private markets.
• Long-standing bank retrenchment, persistent market fragmentation and relationship-driven sourcing continue to underpin a durable opportunity set across European private equity and private credit.
• Access and execution matter more than ever. Origination depth, local networks and disciplined ownership or underwriting increasingly drive outcomes. This favours experienced managers able to navigate complexity across regions and sectors.
• For investors, European private markets offer the potential for attractive relative value, stable income and meaningful diversification across market cycles.

1 Average Annual Vix as of December 2025, Source FRED St. Louis Federal Reserve Bank.

2 Deal activity in Europe gains momentum heading into 2026

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