Key Takeaways
- • Muzinich & Co co-head of private debt, Pan Europe Rafael Torres argues European private credit offers wider spreads and higher yields than similarly rated US credits, citing less competition and a more fragmented market, according to an interview with Fund Selector Asia.
- • Muzinich has deployed €1.9bn ($2.21bn) across more than 90 transactions and reports €2.4bn in investor commitments as of March 2026.
- • Muzinich targets the lower mid-market (companies with EBITDA of €5-25m), building portfolios of predominantly first-lien secured loans across 40-50 names, 8-10 countries and 15-20 non-cyclical industries.
- • Torres says European private debt funds, particularly semi-liquid and evergreen structures, target net yields of 8-9% in euro terms with regular income distributions.
- • The firm operates through three vehicles: Pan-European Private Debt III (closed-end, institutional), an institutional evergreen run-off strategy, and a European ELTIF semi-liquid vehicle aimed at retail and private banking investors.
Summary
Muzinich & Co's Rafael Torres, co-head of private debt, Pan Europe, presented the case for European private credit as a diversifier away from US-centric risks in an interview with Fund Selector Asia. Torres said the US market has become more competitive, with tighter spreads and lower yields as capital has flowed in, while Europe remains less crowded and more stable in spreads, particularly in the lower mid-market. "European private debt typically offers wider spreads and higher yields compared with similarly rated US credits," Torres said, attributing this partly to less competition and a more fragmented market structure. He added that US credits tend to carry higher leverage, whereas European lower middle-market deals often feature lower leverage and more lender-friendly terms, including stronger covenants.
According to Torres, Muzinich has invested €1.9bn ($2.21bn) across more than 90 transactions, with investor commitments of €2.4bn as of March 2026. The pan-European platform was launched more than a decade ago and focuses on companies with EBITDA of €5-25m, a segment the firm views as underserved. Portfolios are built around predominantly first-lien secured loans, and the firm offers the strategy through a closed-end institutional vehicle, an institutional evergreen run-off format and a European ELTIF aimed at retail and private banking investors. Torres said Muzinich relies on local presence across seven European countries, with more than 35 investment professionals in eight offices, arguing that Europe's fragmentation across jurisdictions, languages and legal systems creates complexity that local teams can exploit. The firm reports selecting roughly 3% of the opportunities its managers review.
On sector mix, Torres contrasted US private credit portfolios, which he said can carry 20-30% exposure to software and technology, with European portfolios that are more diversified and include consumer staples and food and beverage. He argued European mid-market companies are more resilient to energy price shocks and supply chain disruptions. Typical credit quality in European private debt sits in the single-B to double-B range, with borrowers generating revenues of €50-250 million. Many institutional-focused European funds are unleveraged at the fund level. Torres said diversifying into Europe can reduce exposure to US macroeconomic, geopolitical and sector concentration risks.
According to Torres, Muzinich has invested €1.9bn ($2.21bn) across more than 90 transactions, with investor commitments of €2.4bn as of March 2026. The pan-European platform was launched more than a decade ago and focuses on companies with EBITDA of €5-25m, a segment the firm views as underserved. Portfolios are built around predominantly first-lien secured loans, and the firm offers the strategy through a closed-end institutional vehicle, an institutional evergreen run-off format and a European ELTIF aimed at retail and private banking investors. Torres said Muzinich relies on local presence across seven European countries, with more than 35 investment professionals in eight offices, arguing that Europe's fragmentation across jurisdictions, languages and legal systems creates complexity that local teams can exploit. The firm reports selecting roughly 3% of the opportunities its managers review.
On sector mix, Torres contrasted US private credit portfolios, which he said can carry 20-30% exposure to software and technology, with European portfolios that are more diversified and include consumer staples and food and beverage. He argued European mid-market companies are more resilient to energy price shocks and supply chain disruptions. Typical credit quality in European private debt sits in the single-B to double-B range, with borrowers generating revenues of €50-250 million. Many institutional-focused European funds are unleveraged at the fund level. Torres said diversifying into Europe can reduce exposure to US macroeconomic, geopolitical and sector concentration risks.
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