European private debt: a powerhouse of unique opportunities

Sandrine Richard, Head of Private Debt at Generali Investments Partners, explains why investing in the private debt of sustainable European SMEs even in today’s challenging environment represents an excellent opportunity for both diversification and selectivity.

The private debt strategy you manage focuses on European SMEs aiming to improve their ESG approach. What are the key trends and opportunities in this segment?

We’re continuing to see remarkable traction in alternative financing, and private debt is growing in popularity for various corporate needs such as capital transmission, acquisitions, and capital expenditures. The aftermath of the pandemic, coupled with disruptions in the mid-market banking sector and higher interest rates, has prompted companies and private equity firms to reconsider their financing strategies. CFOs are now actively exploring private debt financing alongside traditional bank loans, creating a wealth of opportunities for strategies like ours.

In our European direct private debt strategy, our primary focus is on securing debt through club loans with banks or other private debt funds. We favour unitranche financing, where multiple lenders collaborate to provide comprehensive financing for SMEs. We’re seeing a rising trend of private funds seeking smaller tickets and sharing opportunities with other funds, leading to an increased prevalence of unitranche financing.

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