When trying to execute large amounts of money on private equity, Europe is the only alternative to

Tikehau Capital co-founder Mathieu Chabran, speaking with Maeil Business Newspaper (Mail Business), said Europe is the only realistic alternative to the United States for investors seeking to deploy large amounts of capital into private equity. He argued that the U.S. valuation burden is substantial and that the dollar is likely to weaken for a prolonged period, making diversification away from the U.S. necessary. Chabran was advising Korean investors who hesitate to invest in Europe because of currency hedging costs and concerns over low growth.

Tikehau, a European alternative investment manager launched in Paris in 2004, manages about EUR 53.5 billion (roughly 80 trillion won) across private debt, real assets and private equity. Chabran acknowledged political instability and fiscal strain in Europe but said these problems are not spreading to the corporate sector. He cited the growing share of offshore sales at European companies and German large-scale fiscal expansion supporting aerospace, defense and telecommunications. He also pointed to solid rule of law, the European Central Bank's capacity to respond to the economy, and the completion of deleveraging in Southern European banks as factors that make a European recession unlikely. In his view, Europe offers low valuations and leverage, providing safety margins in a high-interest-rate environment.

Tikehau has been positioned early on the energy transition. Chabran said climate issues have become central to each country's sovereignty and that cheap energy is needed to support artificial intelligence. He noted that companies providing grid efficiency and industrial, building and transportation electrification solutions are growing rapidly and are concentrated in Europe, where regulation was tightened early.

On the U.S. private credit market, which faltered earlier this year, Chabran attributed the stress to excess liquidity from large banks, regional banks and BDCs. He said limited funds flowed into loans to companies that should have been financed with equity, creating more aggressive structures in leverage, governance and industry mix. Citing the Bank for International Settlements, he noted that IT accounted for 27% of all private equity credit, with 80% of that in software. Tikehau's related exposure is about 7%. He said portfolio composition and diversification are the first principles of credit investing and that bankruptcies have always occurred in private credit, with investors having forgotten this during a decade-plus of ultra-low rates. Finally, he noted that because private equity credit is largely floating-rate, rising short-term rates benefit yields, though borrowers' refinancing burdens increase.