CVC Private Wealth - 2026 Private Equity and Credit Outlook - Half-Year Review

H1 2026: Resilient Fundamentals Amid Persistent Volatility

At The Start Of The Year

We expected:

• Improving financing conditions to support investment activity across private markets.
• Europe's structural advantages to continue underpinning attractive opportunities in both private equity and private credit.
• Geopolitical volatility to remain a feature of markets, reinforcing the importance of disciplined investment selection and underwriting.

What Happened

• Despite heightened geopolitical volatility during the first half of 2026, the core investment case for European private markets remained intact.
• Financing conditions remained broadly supportive, private equity deal activity proved resilient, private credit markets became increasingly selective, and Europe's structural advantages continued to support attractive investment opportunities across both asset classes.

A Changing Rate Outlook, But A Supportive Financing Backdrop

While geopolitical developments altered the expected path for policy rates, financing conditions remained broadly supportive.

The ECB increased rates in June following renewed inflation concerns, while the Fed maintained a wait-and-see approach, retaining a modest tightening bias.

Europe nevertheless continues to benefit from lower policy rates than the US, supporting a favourable financing backdrop across private markets.

For private equity, this improves financing visibility and transaction activity.

For private credit, direct lending's floating rate structure continues to support attractive income generation while borrower fundamentals remain resilient.

Private Equity

Europe's structural advantages and supportive financing conditions continued to support resilient private equity activity throughout the first half of 2026.

European Deal Activity Remained Resilient

European private equity activity remained resilient amid heightened geopolitical uncertainty.

Deal value increased year on year, while deal count also strengthened, highlighting continued demand for high-quality, differentiated businesses. 

Disciplined Entry Pricing Was Maintained

Even as transaction activity gathered momentum, European buyout valuations remained below those in the US.

This suggests disciplined entry pricing has been maintained amid an active transaction environment, preserving one of Europe's longstanding structural advantages.

Private Credit

Lending activity became more selective during the first half of the year, while the underlying investment case for European private credit remained intact.

Lending Activity Moderated, While Acquisition Financing Remained Strong

European direct lending activity moderated during the first half of the year as geopolitical uncertainty weighed on transaction volumes.

However, new lending increasingly shifted towards acquisition financing, reflecting continued demand to finance high-quality sponsor backed businesses in a more selective lending environment.

Sustained private equity sponsor activity, supportive financing conditions and Europe’s structural advantages continued to underpin an attractive opportunity set across the European private credit market.

Europe's Structural Spread Premium Persisted

Even as lending activity became more selective, Europe continued to offer wider direct lending spreads than the US.

This suggests Europe's spread advantage remains intact, continuing to support attractive risk-adjusted income opportunities for locally embedded lenders.

H2 2026 Outlook

The first half of 2026 reinforced many of the themes we expected at the beginning of the year.

While geopolitical volatility is likely to remain a feature of markets, Europe's structural advantages continue to support an attractive environment across both private equity and private credit.

Looking ahead:

• Geopolitical volatility is likely to persist, reinforcing the importance of maintaining a disciplined, selective and long-term investment approach.
• Despite uncertainty around future policy decisions, financing conditions remain broadly supportive, providing a constructive backdrop across both private equity and private credit.
• Europe's structural advantages remain intact, underpinned by fragmented markets, attractive valuation dynamics, wider lending spreads and a supportive fiscal backdrop.
• In this environment, long-term outcomes are likely to favour experienced managers with differentiated sourcing capabilities, disciplined underwriting, active portfolio management and proven value creation expertise.

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