Private credit's reckoning is coming. Here's what to watch
The asset class that ate the cycle has never been tested by a real default wave. It will be.
Hugh Mercer
Columnist · Policy · Tuesday 2 June 2026 · 7 min read
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Private credit has been sold as the all-weather asset: floating-rate, senior, secured, uncorrelated. Most of that is true, right up until it isn't.
What worries me is not any single loan. It's the opacity — infrequent marks, optimistic recovery assumptions, and a generation of allocators who have never watched the asset class through a genuine default cycle.
Watch three things: the pace of payment-in-kind interest, the gap between marked and realised values, and how quickly fund gates go up when redemptions cluster.
None of this means private credit is a bubble. It means the risk is real, under-priced, and hiding exactly where the marketing says it isn't.
Hugh Mercer
Columnist · Policy · Economist and former adviser
Hugh covers the intersection of economic policy, regulation and markets.