Abrdn has raised £205m at the launch of its new commercial real estate debt fund.
CRED II, an evergreen, UK-focused strategy for institutional investors, aims to grow to £1bn in commitments, having raised its first tranche from public and corporate pension schemes.
The fund will invest in a diversified portfolio of predominantly senior, investment-grade real estate debt assets and will be managed by and Martin Barnewell and Neil Odom-Haslett, head of CRE debt at Abrdn and president of the Association of Property Lenders.
Craig MacDonald, Abrdn’s global head of fixed income, said: “Our private credit offering has evolved considerably over the past few years. We listen to our clients and have designed products and solutions with their needs in mind. CRED II is no exception, combining the track record of CRED I with the attractive market opportunity we are seeing in this space.”
Abrdn said a number of prospective clients are considering the upcoming second close, as the fund is offering a discount until September 2022.
Peter Hall, partner at Momentum Investment Solutions & Consulting, said: “Private credit is an important addition to an institutional portfolio, and given the attractive spreads seen in the real estate debt markets, we see Abrdn’s CRED II fund as a promising solution to capture this opportunity.
“The semi open-ended nature allows our clients access to the illiquidity premia of the asset class alongside some redemption optionality.”
Abrdn said investors were attracted by the potential market opportunity in commercial real estate debt, with spreads reaching 10-year highs as a result of the growing funding gap, as Covid-related defaults reduce the ability of banks to provide financing.
The fund will have an average rating of BBB, and is targeting spreads and illiquidity premia in the range of 375-575 bps and 100-300 bps respectively.
CRED II’s semi open-ended nature provides flexibility for investors to adjust their exposure over time, and offers potential liquidity options to DB pension schemes that are considering buy-out.
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