Barrie Whitman, executive director of high yield at the asset manager, said banks currently provided approximately 75 per cent of European corporate debt, but that this would change over the next 5-10 years as companies increasingly sought alternative sources of financing.
Whitman said there was growth in both the investment grade and the high-yield bond markets, but "only from institutional demand", which he said would grow over the next three years, if a severe recession could be avoided.
He also said Europe should not worry about the supply of corporate debt in the region, as any surplus would "dissipate to the US", where institutionals have had much more experience in investing in corporate debt.
"Institutionals have a tradition of investing in fixed income, and they only think that credit risk is different, but, in fact, they have been taking credit risk without knowing it", Whitman said, pointing to underestimated sovereign debt risks.
He said he saw more talk than action about high yield among institutional investors at the moment, but he noted that, in recent months, fund flows into the sector have been "definitely more inflows than outflows".
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