Aviva Investors has launched a UK senior debt fund targeting a yield of between 2.5% and 3.5% above equivalent maturity UK government bonds.
Aviva Investors has launched a UK senior debt fund targeting a yield of between 2.5% and 3.5% above equivalent maturity UK government bonds.
The vehicle, which will be managed by James Tarry, will invest in fixed-rate first-ranking mortgages advanced at up to 65% Loan to Value (LTV) with five to 10-year maturities. These mortgages are secured against core and core-plus UK properties, sourced from the borrower network of Aviva Commercial Finance.
The vehicle is structured as a closed-end fund with a 10-year final maturity from the end of the 24-month investment period. Final closing is expected for December 2014.
Ben Stirling, managing director of European real estate at Aviva Investors, noted that there is over £140 bn of maturing real estate debt which needs to be refinanced over the next five years.
'We believe this significant funding gap and the attractive yields in the market present investors with a strong opportunity, especially for institutional investors looking for a good diversifier from traditional fixed income assets,' he added.
The company sees attractive opportunities in the senior part of the capital structure, where the supply and demand imbalance is at its greatest, according to Tarry.
'We believe the opportunity in the market for senior debt investors is compelling enough for managers such as Aviva Investors to replace the space previously occupied by banks,' commented Tarry.
Aviva Investors’ real estate team comprises 60 investment professionals managing over £23 bn in assets.
