LD and SEB invest in Nordic short-term residential loans
Denmark’s LD Fonde and SEB in Sweden are among Nordic institutional investors to have committed capital to a new fund investing in short-term residential development loans in the region.
The fund, Kinnerton Residential Development II (RD II), raised just under €130m by its first close on 27 September, and is aiming for a total of between €200m and €250m by the final close — expected to take place in 2019.
The fund is a successor to Kinnerton Credit Management’s Fund C, which was the Copenhagen and London-based firm’s first fund to invest solely in residential development loans.
This first residential loans fund raised €102m in 2015 and runs out by the end of 2018.
Jens Bisgaard-Frantzen, chief executive at Kinnerton Credit Management, told IPE Real Assets it was particularly the short-duration of the financing that made investment in the fund appealing to pension funds.
“We are able to generate good returns and also have relatively short loans, at which duration regulatory capital requirements are less onerous for institutional investors,” he said.
RD II plans to issue a highly-diversified loan portfolio of between 50 and 80 loan facilities to development of middle-income homes in and around growth cities in Denmark and Southern Sweden, according to the firm.
These credit facilities are short-term with typically 16-18 months’ maturity.
Bisgaard-Frantzen said LD Fonde and Swedish bank SEB were among the investors in RD II, which includes a range of Danish and Swedish institutional investors and “high net worth individuals”.
LD Fonde (LD Funds) is the new name for LD, or Lønmodtagernes Dyrtidsfond, which runs a non-contributory pension fund for some Danes, based on cost-of-living allowances granted several decades ago.
Now that the operation running the pension fund has been tasked with managing a second fund — Lønmodtagernes Feriemidler, a fund based on compensation for a certain period of statutory holiday allowances for Danish employees which they cannot take as actual time off— it is rebranding itself.
Kinnerton’s RD II fund has a four-year investment period and is targeting double-digit returns, Bisgaard-Frantzen said.
So far, the firm has invested in 44 residential development credit facilities, he said, of which 27 have been successfully repaid.