Expect more private credit defaults, says Mathew Cestar, president of Arini Capital Management, on the newest episode of Credit Exchange with Lisa Lee, taped in the London offices of the alternative asset manager. Defaults in the space have so far been relatively muted, but “that will start to change, because they can’t defy gravity,” Cestar believes. Result: more dispersion of returns among private credit shops.

Europe has mostly missed the AI boom that’s driven a large part of US economic growth. But that actually makes European credit more appealing, Cestar contends, because while the intersection of technology and AI is an exciting equity story, that intersection in credit can involve “a lot of risk.”

Cestar, who was once the co-head of investment banking at a large global bank, expects to see a broadening of M&A deals in terms of size, sectors and geographies, given the supportive rate and anti-trust environment. He also sees continued interest in Europe from global investors. And he welcomes more regulatory scrutiny for private credit, predicting that will result in better players in the market.

“We’re super-embracing the fact that regulatory folks are now focused on private credit,” says Cestar. “If you want a market to grow sustainability and consistently, the regulatory framework is critical.”