Beyond US exceptionalism: Building resilient portfolios with alternative credit
Concerns are growing over economic activity, political tension and policy uncertainty in the US, making for a challenging investment environment. Headlines throughout 2025 underlined this uneasiness; foreign investors were reportedly leaving US markets in droves amid currency volatility and tariff-driven fears, possibly spelling the end of US exceptionalism as we know it. Adding to these doubts is the spectre of an increasingly deglobalised world.
In this climate, separating rhetoric from reality is crucial. And individual asset classes need to be considered on their own merit.
Global private credit, for example, remains an attractive opportunity set for those portfolios seeking diversified sources of stable income in unstable times.
Despite a changing world, Asian investors can build resilience with alternative credit – whether corporate or asset-backed – by diversifying exposure across a range of asset classes and across the US and Europe.
US remains a rich source of opportunity despite new risks
Despite prolonged uncertainty, the US economy has shown its ability to withstand shocks and beat pessimistic forecasts. Recent recession fears have given way to tangible optimism.
US GDP growth for 2026, for instance, is projected to outpace its G7 peers, according to the International Monetary Fund’s World Economic Outlook. Corporate earnings remain robust, and default rates for US credit, especially among higher-rated borrowers, remain overwhelmingly stable.1 The US dollar, although volatile, continues to anchor international portfolios, providing depth and liquidity that few global markets can match.
In this environment, US-based credit continues to be an important source of portfolio diversification. Investors are drawn by its strong fundamentals, attractive risk-adjusted yields and proven resilience.
While issues such as First Brands’ bankruptcy cast a cloud over private credit, industry experts and allocators stress these incidents remain isolated. Disciplined managers continue to demonstrate the importance of robust due diligence in an environment rich with opportunity but not without risk.
Europe offers unique risk diversification exposure
While the US remains undeniably attractive, the universe for alternative credit is broader.
Europe, while also grappling with geopolitical fragmentation and slower economic growth, offers pockets of long-term value, especially in non-cyclical sectors and upper middle market lending.
Impact-driven strategies and sectoral innovation are rapidly becoming the new frontier. According to a recent survey of asset managers globally, 37% identified European direct lending as having the most growth potential over the next five years.2
Opportunities in the region reflect the continent’s geopolitics. A continued focus on energy infrastructure for both renewable energy and energy security, for example, reflects how structural changes are driving compelling investments.
Diversify globally, derisk locally
The story of alternative credit is fast growing beyond US exceptionalism. It is about building portfolios that blend US scale and resilience with global diversification, reaching across borders and asset classes to capture income, risk mitigation and long-term value creation.
The US remains at the core of global alternative credit strategies, but just as importantly, looking beyond the US has never been timelier.
Nuveen’s Alternative credit insights: Diversify globally, derisk locally explores the range of opportunities across credit segments and potential risks. Two of them include direct lending and Commercial Property Assessed Clean Energy (C-PACE).
Commercial Property Assessed Clean Energy (C-PACE)
Unique opportunities exist in the US for public-private partnerships like C-PACE. These are fuelled by a $3.7 trillion gap in required infrastructure spending, while public sector budgets face competing demands and a need for diversified funding sources.
Importantly, given legislation is enacted at US state level, it remains insulated from federal policy shifts. C-PACE policy is broadly adopted across the political spectrum due to its use as an economic development tool entirely financed by the private sector. Available across the vast majority of the US, the rapidly maturing asset class continues to drive strong deployment.
It presents a compelling, structurally insulated opportunity in private credit to finance energy efficiency, water conservation and resiliency upgrades or new construction for commercial real estate. The credit enhancements of the product drive strong performance, including a 100% recovery rate on principal since inception.
C-PACE’s consistent premium over IG-rated public alternatives
The benefits of C-PACE extend beyond sustainable characteristics with most property owners using C-PACE as a low cost, fixed-rate alternative to traditional financing, while policy makers benefit from the influx of private capital into local economies.
Direct lending in the US and Europe
US direct lending remains resilient and attractive, particularly in the middle market. Deal flow is strong, driven by ongoing private equity activity and refinancing needs. Borrowers are in good health and sponsors continue to prioritise liquidity management, ensuring demand for diverse and flexible financing options.
Competitive dynamics have intensified as more capital enters the sector. However, the advantage still lies with experienced, well-established lenders capable of sourcing proprietary deals, maintaining disciplined underwriting and managing risks. For experienced lenders, this competitive environment has not led to a material deterioration in terms, with leverage and covenants in new deals remaining within prudent ranges.
US direct lending has shown relatively low risk and return dispersion
While the US market remains attractive, European direct lending offers a compelling alternative or complimentary investment option – particularly in the context of evolving macroeconomic dynamics.
A strategic bias towards middle-market borrowers, those focused on operating in local markets and thus inherently less exposed to global market forces, means the asset class in Europe offers investors significant regional resilience.
European private credit increasingly focused on resilient, non-cyclical themes
Higher US rates, currency volatility and stubborn inflation have brought into focus the importance of superior risk-adjusted returns for investors. In this context, European private credit stands out for its robust yields, lower leverage and structural protections – providing stability through cycles and shifting central bank policies.
Additionally, the moderation in inflation versus the US outlook, coupled with faster loosening of monetary policy, has preserved deal flow and attractive pricing in European markets. European private credit is largely floating rate and offers attractive risk-adjusted returns, particularly as spreads remain comparatively elevated versus US syndicated markets.
Read more about the diversification opportunities across alternative credit in our latest insights on the Nuveen website.
Sources
1 - Source: S&P Global “Default, Transition, and Recovery: Regional Divergences Should Keep The Global Default Rate Steady Through September” dated 26 Nov 2025
2 - Source: Mercer “Private Markets in Motion: Private debt Taking the pulse of global asset managers” as of July 2025
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