By Andrew Kahn, Co-founder and CEO at Partners for Growth
There’s a conversation happening in institutional investment offices right now, and it’s overdue.
Private equity exits are stalling, VC timelines continue to stretch, and the demand for real, distributable cash flow, not paper returns, has never been louder. McKinsey’s 2025 Global Private Markets Report found that 2 ½ times as many LPs now rank DPI (distributions to paid-in capital) as a “most critical” performance metric compared to just three years ago.
The shift matters because it signals a deeper rethinking of how institutional portfolios gain exposure to tech-driven growth. For years, the default path ran through PE and VC, equity instruments that sit at the bottom of the capital structure, lock up capital for the better part of a decade, and deliver returns tied to exit markets. When exits were flowing, the trade-off worked. In today’s environment, where hold periods are lengthening, IPO windows are unpredictable, and paper valuations don’t satisfy funding obligations, allocators are asking a harder question: is there a way to maintain exposure to high-growth companies while getting paid along the way, with real structural protection if things don’t go as planned?
The question is driving a more deliberate reallocation across private market portfolios and within private credit itself. Moving capital into direct lending is the first step most institutions have taken as a core private credit exposure. However, direct lending spreads have compressed meaningfully over recent years as competition in the broadly syndicated loan market returned. Additionally, the strategy is heavily concentrated in sponsor-backed, mid-market leveraged buyouts, raising concerns about correlation across private equity programs. Many allocators exploring private credit more deeply are looking at structured, sector-specific credit strategies, asset-backed lending, and receivables financing, as well as growth-stage strategies that offer differentiated yield, shorter duration, and exposure to the tech and fintech sectors, where the rest of their portfolio may be underweight. This is the space where growth debt operates, and where we see compelling opportunity.
The Macro Case Is Clear
Private debt as an asset class is projected to grow from $1.5 trillion to $2.6 trillion by 2029, according to Preqin’s Future of Alternatives 2029 report, a compound annual growth rate of nearly 10%. CalPERS has already acted on this view, increasing its private debt target allocation from 5% to 8% as part of a broader shift toward 40% private asset exposure. Their private debt portfolio returned an estimated 12.8% in fiscal year 2025.
This isn’t simply institutional capital chasing a trend. It’s capital allocators recognizing key attributes we value in our growth debt strategy: a privileged position in the capital stack, collateral and structure to mitigate downside, together with income and short duration to deliver differentiated DPI from equity portfolios.
Growth Debt in Practice: Tabby*
Our facility to Tabby, the GCC-based consumer fintech, illustrates what disciplined growth debt looks like in practice.
When we structured the first transaction in 2021, it was an asset-backed warehouse facility underwritten against receivables, with custom advance rates, tight covenants, and backup servicing. The credit facility was designed to generate income from day one, scale with the business, and capture upside potential through a warrant.
raised $700 million through a receivables securitization with J.P. Morgan, at the time of closing in 2023, reported as Tabby has since become one of the most valuable fintechs in the Middle East, most recently valued at $4.5 billion in a secondary share sale, and has surpassed $10 billion in annualized transaction volume.
We didn’t need to take equity risk to participate in Tabby’s growth. PFG provided a structured receivables-backed financing, with covenants and collateral to manage risk, earning participation in the upside via equity warrants. Managing our duration and seeking to mitigate downside through asset-backing, PFG’s growth debt solution fueled Tabby’s rapid expansion, and delivered the potential to drive incremental equity returns above our underwritten credit yield.
What CIOs Should Be Asking
If you’re managing a portfolio where PE exit timelines are extended and VC distributions feel distant, the question isn’t whether private credit belongs in your allocation. The question is whether your private credit allocation is built to achieve its goals looking forward.
Growth debt, when structured properly, delivers regular income from day one, features shorter duration than traditional PE without depending on exit multiples or public market valuations to generate returns. Structural downside protection through covenants and collateral, combined with embedded potential upside through warrants, produces a return profile that complements both fixed-income and equity-linked strategies in ways conventional direct lending cannot. For allocators already carrying illiquid tech exposure through PE and VC, it offers something those positions currently don’t: distributions.
The managers who understand the specific dynamics of growth-stage lending, receivables-based structures, fintech credit underwriting, and market ecosystems are building portfolios that look very different from plain-vanilla direct lending. Growth debt’s return profile, contractual yield from day one, shorter duration than PE or VC, structural downside protection, and warrant-driven upside, offers institutional allocators something rare: meaningful exposure to high-growth companies without the illiquidity premium or the exit dependency that has made traditional private equity so difficult to underwrite in the current environment.
A Structural Opportunity
As private credit headlines drive ebbs and flows in the private wealth and institutional capital channels, differentiated opportunities are emerging. I have focused on growth-stage investing for four decades and have observed a persistent dynamic: demand for capital from high-growth companies rarely wanes but supply certainly does. When risk tolerance recedes, generalist investors move upmarket and bank credit tightens, the opportunity set for specialist managers expands. Allocators who position toward structured, asset-backed, sector-specific strategies are building portfolios designed for durability, not just capitalizing on opportunistic deployment.
Against this backdrop, growth debt has evolved beyond a niche credit allocation. It represents a structural solution to portfolio concentration risk and return pressures, one built for durability across market cycles. Current dynamics make the opportunity particularly compelling: the supply-demand imbalance favors specialist managers with deep sector expertise.
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* A note on case study selection: Tabby was selected to illustrate how PFG structures growth debt in asset-backed, high-growth fintech environments because it exemplifies several defining characteristics of PFG’s approach: a receivables-backed warehouse structure with custom advance rates and covenants; deployment in a market with limited credit infrastructure; a facility designed to scale alongside the business; and embedded potential equity upside through warrants. Tabby’s trajectory also makes it well-suited to the specific thesis of this post, namely, the ability of structured growth debt to generate contractual yield and downside protection while participating in company upside, without taking equity risk. PFG has financed 250+ companies across 15+ countries; this case study is not representative of all portfolio outcomes. Past performance is not indicative of future results.
The views expressed are my own and do not necessarily reflect those of my employer.
This content is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. Any such offer will be made only to qualified investors through confidential offering documents. All investments involve risk, including the possible loss of principal. Past performance is not indicative of future results.
