KKR expects a revival in European credit markets, driven by rapid growth in asset-backed finance as regulatory reform opens the door to a wave of new institutional investment, according to a Bloomberg report. 

Tal Reback, global investment strategist for KKR’s credit and markets business, said on the Bloomberg Intelligence Credit Edge podcast that Europe is entering a “renaissance” as investors seek geographic diversification beyond the US. She said lower corporate leverage and strong cross-border buyout activity are supporting credit demand.

KKR believes potential reforms to Europe’s €1.2trn asset-backed securities market could unlock close to $1trn in high-grade asset-backed finance opportunities. Reback said insurers are currently discouraged from holding such exposure due to capital charges.

“If that reform — which looks like it’s trending in the right direction — happens, that can open up what we estimate as close to $1 trillion of high-grade ABF opportunities,” Reback said. She added that European insurers hold less than 1% exposure to asset-backed securities, compared with about 17% in the US.

KKR sees opportunities across auto finance, consumer credit, power generation, and solar infrastructure. Asset-backed finance has been a bright spot for the firm, with $84bn under management, up 30% from a year earlier.

Beyond Europe, KKR also highlighted opportunities in Asia credit, particularly Japan, where high-yield and investment-grade debt have outperformed this year. The comments echo similar views recently expressed by Apollo Global Management as large private credit firms reposition for the next phase of global lending growth.

If you think we missed any important news, please do not hesitate to contact us at [email protected].

Can`t stop reading? Read more.