Private credit funds seek vehicles to bring in European retail investors

Kellie Ell

Reporter

Private credit funds are looking to tap into retail investors in Europe after successfully accessing similar investors in the US.

“The mass affluent types of people are entering the space,” says Paul Moreno Blosseville, president of Opale Capital. “Right now, everyone is rediscovering how credit is attractive.” Moreno Blosseville, who is based in France, says credit wasn’t attractive in Europe for a long time because of low rates and bullish equities. But now retail investors think yields will stay high.

Over the past three-to-five years, retail investors in the US have accessed private credit funds predominantly through business development companies. Firms such as Blackstone, KKR and Apollo Global also have credit funds open to individual investors.

“Right now, everyone is rediscovering how credit is attractive”

Paul Moreno Blosseville, President | Opale Capital

However, BDCs don’t exist in Europe. Other vehicles, such as European Long-Term Investment Funds (ELTIFs) have been largely unsuccessful, says Moreno Blosseville. “The regulation was just too restrictive.”

ELTIF 2.0, which will come into force in January of next year, may help. But for now, Moreno Blosseville says the main distribution channels are insurance companies, which manage a lot of household wealth in France.

William Barrett, co-founder and managing partner at venture capital firm Reach Capital, says European countries struggle to agree “on what to do regarding distribution to the retail market and anything that is illiquid”.

He says many private equity firms are now creating feeder funds, and then partnering with banks to distribute the funds in private wealth divisions. Others are working with independent financial advisors.

“There’s still some work to do on the fund structuring side and on the regulatory side, to really tackle the market,” says Barrett.

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Global credit funds & CLO's

November 2023 | Issue 259

Published in London & New York.