Cheyne Capital Management is targeting a £500m (€588m) capital raise for its latest real estate debt fund, according to one of the investors in the fund.

The Public Employees Retirement Association of New Mexico approved a £72m commitment to the Cheyne Real Estate Credit Holdings Fund V vehicle at its board meeting last week.

According to the pension fund, the Cheyne fund has an opportunistic strategy and will target Europe, with a focus on the UK and Germany.

Cheyne will provide self-originating loans on real estate and structured debt for commercial and residential properties.

It will target net returns of 15% on loans between $10m and $50m.

Joaquin Lujan, director of rates and credit for new Mexico PERA, said: “This is the first time that we have invested with this manager.

“We first began to follow this manager in 2013 with its Fund III and we were impressed with the performance of this fund.”

New Mexico believes there is a strong opportunity in European real estate debt.

“Over the next couple of years, it’s been projected that £800m of debt will be coming due,” Lujan said.

“The Brexit situation and other factors have taken out many lending institutions in the marketplace leaving an opening for firms like Cheyne.”

New Mexico PERA has placed the investment into its the high-return portion of its credit portfolio.

The $14.3bn pension fund has a 15% target allocation – or $785m – to credit.