BNP Paribas, the French bank, has closed its third leveraged loans fund at €306.5m ($386.5m) amid growing concern that Europe's private equity market is starting to overheat fuelled by a surplus of cash.

The deluge of collateralised loan obligation funds - like the Leveraged Finance Europe Capital III fund just raised by BNP Paribas - have brought such liquidity to the debt markets. This is allowing private equity firms to borrow record amounts.