Private credit must shed reliance on cheap capital, says The Economist’s Lemssouguer

The private credit sector faces a necessary reckoning as it moves away from the economic conditions that defined its recent expansion. In an analysis published on 1 June 2026, Hamza Lemssouguer argues that market participants must abandon long-held assumptions built on cheap capital, stable growth, and predictable exits.

Lemssouguer’s assessment, published in The Economist, suggests that the strategic framework previously underpinning private credit investments is no longer viable. The argument centres on the need for a fundamental shift in how the sector approaches risk and valuation, moving beyond the era of low interest rates and consistent economic expansion that characterised much of the industry’s growth.

Historically, the private credit market operated under the belief that capital would remain inexpensive and that economic growth would provide a steady tailwind for asset performance. This environment also fostered expectations of reliable liquidity events, allowing investors to exit positions with relative ease. Lemssouguer contends that these pillars of the business model are now obsolete.

The piece frames this transition not as a confirmation of a systemic crisis, but as a call for strategic adjustment. The headline “The pain to come” implies impending difficulties for institutions that fail to adapt, yet the core narrative emphasises the necessity of discarding outdated premises rather than predicting a collapse.

As the sector navigates this new landscape, the focus shifts from relying on favourable macroeconomic tailwinds to developing more robust strategies for capital allocation and risk management. The argument underscores the importance of realism in pricing assets and structuring deals in an environment where cheap money and guaranteed exits are no longer guaranteed features of the market.