Principal Real Estate Investors has launched its first real estate debt fund as a UCITS-compliant vehicle.
Principal’s Real Estate Debt Fund, Irish-domiciled, will primarily invest in US CMBS, a sector the firm has been active in since 1998, with a portfolio worth $9bn (€8.2bn).
The fund is registered in the UK, Belgium, France, Finland, Germany, Guernsey, Ireland, Italy, Jersey, the Netherlands, Spain, Sweden and Switzerland.
It will also be registered in Singapore and co-managed by Marc Peterson, Jason Haigh and Scott Carson.
Unsecured bonds issued by companies primarily engaged in a real estate or real estate-related business (unsecured REIT debt) will also be targeted.
Nick Lyster, global head of Wealth Advisory Services, said: “Investors are looking to diversify their fixed income allocation at a time when yields are low or in negative territory.
“Real estate debt may be interesting to investors who want to diversify away from traditional fixed income, as there could be a non-correlation advantage. If you want good returns in the current market, CMBS and unsecured REIT debt may be an attractive option.”
He said the fund could provide enhanced yield, diversification and reduced volatility, while aiming to mitigate credit risk when added to a portfolio strategy.
“As a result,” he added, “this unique asset class appeals to institutional real estate investors and alternative fixed income investors looking to diversify credit exposure.”
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