UNITED STATES - Increased pension fund capital in the United States is expected to flow into structured finance over the coming months, following moves by two schemes to invest in the sector.
Pramerica Real Estate Investors is planning to triple the amount of mezzanine finance deals it does over the next 12 months, while Virginia Retirement System and Los Angeles Fire & Police Pension System have both committed $100m (€67.6m) and $30m of capital respectively to the Guggenheim Structured Real Estate III commingled fund.
Virginia Retirement stresses its latest move is not a short-term play as it is trying to build a diversified portfolio which will produce good returns at an acceptable level of risk.
Moreover, the feeling by many investors is there is a very strong investment opportunity now in structured finance with the dislocation in the credit markets, according to Roger Pratt, managing director at Pramerica.
"We think there just is less mezzanine capital in the marketplace now, when you compare it to a few months ago. So there could be some very interesting deals out there for us to invest in."
Pramerica expects to invest around $1bn over the next 12 months, through its Prisa II and III funds and single client accounts, compared with past years when the company has done mezzanine deals totaling around $200m.
Anticipated deals will involve investing in existing office buildings, apartments, hotels and retail to achieve a 8.5-9.5% return on the mezzanine deals.
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