TH Real Estate’s European Cities Fund has raised €500m from institutional investors.

The open-ended vehicle is targeting assets in 42 cities offering long-term growth.

TH Real Estate launched the fund, targeting European cities, in March.

TIAA allocated an initial €200m for the Luxembourg-based fund, for which it is aiming to raise up to €5bn by 2021.

It has a targeted average 30% loan-to-value ratio.

Andrew Rich, fund manager, said investors were “looking beyond short-term uncertainty and still see value in long-term defensive strategies backed by demographic mega-trends, driving growth in successful cites”.

He said cities would have their own market cycles.

“But, over the longer term, [they] should account for an increasing share of the region’s output, benefit from structural trends and be smart destinations for long-term real estate investment capital,” he said.

“A city-based real estate strategy, underpinned by long-term, structural trends, that strikes the right balance of risk and diversification, while taking advantage of short-term pricing opportunities, may enjoy above-average portfolio level returns, lower-than-average volatility and modest downside risk, for long-term investors, enhanced further by a market recovery.”

The fund completed its first deal in May this year, buying the Meraville Retail Park in Bologna at a net 5.96% initial yield from Orion Capital.