Luxembourg-based investment services firm LRI Group has partnered with Aggregate Debt Advisory to launch a €500m private debt real estate fund.

The fund, known as Aggregate Debt Fund, will focus on building a diversified portfolio of mezzanine loans, with an emphasis on residential real estate development in Germany.

It will target an annual return of 6% to 8% and a term of up to 7 years.

The fund is aimed at pension funds, insurance companies and family offices and will initially be registered for distribution in Germany, Austria, Switzerland and Luxembourg.

LRI Invest will act as the alternative investment fund manager while Aggregate will function as the investment advisor.

Frank Alexander de Boer, the managing director of LRI Group said: “The Aggregate team consists of experienced specialists in asset management, real estate financing, restructuring and risk management.

“We are very happy to be working in partnership together, with LRI acting as the alternative investment fund manager, to help implement this fund project.”

Norbert Kickum, the managing director of Aggregate Debt Advisory, said: “Currently there are few comparable funds on the market that enable professional investors’ access to residential development finance through mezzanine capital in core locations.

“Especially with regard to Solvency II regulated companies, real estate debt offers an advantage over leveraged core real estate funds.”