Aviva UK senior debt fund to target low-risk investors
UK - Aviva Investors plans to launch a UK senior debt fund early next year targeting pension fund investors with a modest appetite for risk.
Neither a target size nor a precise debt has been decided for the fund, which will be a joint project with the insurer's loan-originating commercial finance operation.
Aviva Commercial Finance has issued commercial mortgages worth around £10bn (€12.3bn) over the past decade.
Ben Stirling, real estate managing director for Europe at Aviva Investors, said: "This is a good opportunity to take advantage of existing competences."
Stirling said the environment for liquidity and debt finance created a "compelling demand-led story", especially in the UK.
However, he did not rule out expansion into mainland European debt markets.
"Continental Europe is facing similar issues to the UK - the lack of available debt," he said. "It would be a logical extension."
Although the fund has long been in discussion, a difficult fundraising environment and the fact debt is a relatively new proposition for investors has slowed its progress.
"It's a question of getting investors comfortable with investing in these assets," Stirling said.
"Our advantage is that we're a big fixed income manager. These are low-risk investors, but they want steady income. They see this is primarily a fixed income product, rather than a real estate product.
"If you're talking about all loans with 60-65% LTV, you're into mezzanine territory and beyond. Potentially, there's a more attractive return, but there's also more risk. Senior debt stacks up well in terms of risk and return.
He added: "The further up the capital structure you go, the further removed you are from the real estate."
In separate news, Longbow Real Estate Capital is to launch a £500m UK debt fund.
The planned fund will be a significantly larger successor to Longbow UK Real Estate Debt Investments II.
Neither of the firm's managing partners was giving interviews this week.