Schroders Capital has raised £100m (€119m) from UK pension funds and local authorities to invest in senior real estate debt.

The UK Senior Loan fund will target a gross return of 6.5% by directly originating loans of between £15m and £100m in mid-market assets.

Schroders Capital recently hired Natalie Howard from DRC Savills Investment Management to head its new real estate debt platform and is seeking to raise £1bn for a series of separate accounts and funds this year.

Howard said: “Traditional sources of financing began to dwindle after the global financial crisis, particularly as banks reined in their lending amid closer regulatory scrutiny. But the need for real estate loans continues to grow.”

Citing estimates by CBRE of €1trn in outstanding commercial real estate debt in Europe, requiring €200bn of annual financing, she said: “We therefore believe there is a significant opportunity for Schroders Capital to meet the growing demand from institutional investors looking to diversify their private debt, real estate or fixed income portfolios.”

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