European private capital markets stand at a pivotal moment.

There is a growing sentiment that the continent will be well positioned to capitalize on growing allocator interest in the coming years. Once viewed as the problem child – and to be clear, it still has plenty of problems! – Europe is now being viewed more favorably by both GPs and LPs alike.

The region’s complexity (regulatory, cultural, and economic) means successful investing hinges on genuine local engagement and the patient cultivation of trust, rather than investors seeking mere transactional gains.

Despite public equity under performance versus the US, the real opportunity lies in Europe’s vast mid-market, home to some 35,000 companies hungry for private equity, private debt, and infrastructure capital.

The need to maximize productivity and increase its competitiveness on the global stage, as raised by Mario Draghi, is prompting European governments to focus on energy transition, AI innovation as well as a renewed commitment to defense spending. The cost of energy in Europe is between 50% and 70% higher than in the US, leading to massive investment in renewable energy production and distribution.

There is a three-way capital flow dynamic at play: i) European allocators who found themselves overly exposed to the US; ii) US players wishing to increase their presence, and iii) Asian players that are trying to pivot out of the US.

The fragmentation of capital markets is also contributing to more private capital coming in to fund Europe’s future, adding to the sentiment among leading GPs that further optimism lies ahead. This is helped by the fact that the mentality among company owners/founders in Europe has completely transformed in recent years. While once they might have been suspicious of private equity/private debt, now they are asking, ‘we’re in a deep hole how can you help us?’

Having invested $350 billion over the last 25 years, Europe represents the second most important geography for Blackstone. This summer, it announced plans to invest $500 billion over the next decade, reflecting the firm’s deep level of conviction. Rather than chasing macro plays, their approach targets deal specificity – right sector, right team, right price – which is essential given Europe’s diversity and persistent “discount” to US peers.

Data infrastructure and AI is set to be a key investment, as the US private markets group aims to become a capital provider to picks and shovels companies building the entire ecosystem: power and transmission, GPU providers, data centers. The firm has become deeply expert at de-risking, structuring, and scaling in these capex-intensive areas, notably in France, the UK, and Germany.

GPs well recognize that while the patchwork nature of Europe represents a host of opportunities, purchase price discipline is vital as they seek out deals. Also key is ensuring the right management teams are in place to navigate volatile markets.

During Day One of the main conference at IPEM Global, GPs commented that success depends on:

🔸 Differentiated sector expertise
🔸 Ability to drive fundamental value improvement and enduring change
🔸 Paying the right purchase price

In that context, while nobody can possibly predict what the future holds, sticking to the above should at least ensure that the assets private capital firms buy remain good, if not great, investments despite what the geopolitical picture looks like five to 10 years from now.

As was noted by one GP, “You can’t get bogged down with geopolitics. Ten years back we had the Euro crisis. People have the tendency to project the past into the future…but when you learn from the past, good things can happen.”

Europe is shifting from the margins of global private capital to the center of the story.

KKR’s steady build-out, with offices in London, Paris, Frankfurt, Madrid, Milan, and Stockholm, underscores a conviction that private equity must be embedded locally to unlock opportunities.

European corporates, constrained by relatively small home markets, are increasingly turning to global partners to scale abroad, particularly in the U.S. and Asia. “Europe is full of local leaders, ready to expand internationally,” said one European GP. Rather than look at the region as relatively stable and a way to de-risk, they added: “If you invest in Europe, do so because you believe in it.”

Europe’s old narrative of lagging innovation may be overstated.

While the US leads in AI deployment, the application layer offers a field where Europe’s strengths can translate into competitive advantage. Public capital is also stepping in, with Berlin pledging EUR12 billion to tech start-ups and the French government set to make a EUR109 billion investment in AI projects as it bids to be at the forefront of AI innovation and sovereignty.

The potential to attract more capital into the region is being helped, in part, by a slowly improving macro picture and more fiscal spending on areas like defense security.

However, Europe needs to overcome a cultural challenge – not just regulatory – if, as many are hoping for, private capital is able to effectively finance its energy and security needs.

For instance, it still has fragmented pension systems, including in the UK. To encourage the next generation of savers to participate in the real economy, it will require a savings and investment union. In places like Germany, the realization is there’s no point putting cash under the mattress. Pension reform is front of mind.

And while the appetite is strong among European governments, notably France, Germany and Italy, who want to seize the moment and undertake reforms, the challenge is how to make Brussels a more dynamic place. In Europe, there is still a tendency to regulate then innovate. In China, which has undergone tremendous transformation in the last 20 years, in this current climate of AI advancements the mindset is to innovate, then regulate. It’s a completely different mindset.

Looking ahead, one way to unlock Europe’s potential is to find a way to forge better public private partnerships. In the commodities marketplace, where rare earths and critical minerals will be key to future energy needs such as battery production for EVs, the system is broken, with western economies acutely dependent on command economies like China.

The cobalt for smartphones, the lithium for EV batteries… to have any chance of hitting net zero, Europe needs to recognize these are not commercial commodities anymore; they are strategic asset opportunities for investors.

“The struggle is how do we funnel Europe’s massive savings in to areas like deep tech, which is the future of sovereignty. European family offices, what do they do? They do real estate and then they do US tech but how many of them are investing in deep tech? You have to invest in the future, like the US. The culture in Europe has to change,” said one investor at IPEM.

It’s tough for liberal economies to change their lens to a longer investment horizon but it is urgent and important that they do.

“Can we harness the best of commercial and public partnerships to successfully innovate? Not doing so will look like a huge political defeat,” warned one of the IPEM panelists.

From AI to logistics, from private credit to scale-driven private equity, the long-term winners in Europe will be those who can combine resilience with bold thematic bets.

Carpe Diem.

📰 News from the floor

Check out the latest hot-off-the-press industry updates from across the IPEM Community:

🔸 Investing in Europe white paper by Eurazeo

🔸 Apollo expands its wealth platform with three new evergreen ELTIFs

🔸 ‘Day in the life’ animated video explaining asset-based finance by Ares

📊 Statistic of the day

Fresh from the IPEM Allocation and Fundraising Trend Report 2026

54% of LPs are seeking new GP relationships in private equity turnaround/restructuring funds, a 15% percentage point change on last year; the largest YoY move within the asset class.

🗨️ Quote of the day

“It’s not a middle age crisis (for private equity), it is a turning point. It’s all about operational value creation. How do you grow your investment team? How do you infuse the culture? Value creation teams will grow in size and seniority.”