M&G Investments has reached the first close of its latest vintage of real estate debt funds, including £350m (€411m) of capital from four clients. The capital will be deployed into loans across Europe originated by M&G’s real estate finance team, the firm said.
The latest funds attracted a £200m investment from LGPS Central, £100m from the Prudential With Profits Fund and £25m from one of the UK’s largest insurers, M&G confirmed.
M&G added that it will be raising further capital for these funds and segregated mandates over the next 18 months “from global institutional investors seeking potentially double-digit returns available from direct commercial real estate loans in Europe”.
Dan Riches, co-head of real estate finance at M&G Investments, said: “We are pleased to reach the first close of our latest funds with strong support from a number of cornerstone investors. Rising interest rates have contributed to a reduction in property valuations, providing investors accessing this asset class now with lower debt bases and subsequently greater downside protection and preservation of capital.
“We continue to see very attractive risk adjusted returns in the sector. European and Asian investors have been increasing allocations to private market investments and debt that benefits from being secured against real assets and is currently offering compelling returns relative to other asset classes. Of growing importance to the sponsors we work with is our ability to provide bespoke financing solutions across the capital structure and our strong track record in executing deals.”
Nadeem Hussain, head of private markets at LGPS Central, said: “LGPS Central is delighted to have invested in the latest vintage of M&G’s Real Estate Debt Funds. This investment plays an important role in fulfilling our long-term obligations and objectives and we very much look forward to working closely with M&G’s Real Estate Finance team in the future. Their approach to constructing portfolios and experience in managing this attractive asset class is a key driver of our partnership.”
Ciaran Mulligan, CIO of investment management and oversight at Prudential With Profits Fund, added: “Over a number of years, we have been increasing our allocation to private assets and real estate debt is an important part of this market as we see attractive risk-reward dynamics in the current environment. We have significant exposure to the real estate equity market and by increasing our exposure to debt, we are seeking to build a more diversified portfolio. We have invested in previous vintages of the Real Estate Finance team’s funds and as they reach maturity, we want to retain our exposure.”
Grant Hadland, head of UK institutional distribution at M&G Investments, said the LGPS Central mandate “builds upon our long experience of working with local government pension schemes and UK institutional investors”.
He added: ”For those pension funds and institutional investors that can withstand reduced liquidity, certain parts of the private markets universe still offer the potential to lock-in higher returns that typically come with lower volatility.”
M&G’s real estate finance team is spans the UK, Europe and Asia, and is part of the firm’s £74bn private markets business, established in 2008. The team provides senior, junior and whole loans secured against core assets through to speculative developments, while negotiating strong protections for pension funds, insurance and institutional clients.
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