abrdn has launched the Commercial Real Estate Debt fund II (CRED II), an evergreen, UK-focused strategy for institutional investors. CRED II is designed to generate attractive levels of income by investing in a diversified portfolio of predominantly senior, investment grade real estate debt assets. The fund will have an average rating of BBB, and is targeting spreads and illiquidity premia in the range of 375-575bps and 100-300bps respectively.

The fund aims to grow to £1bn in commitments, having had a first close of £205m with public and corporate pension schemes in the UK. A number of prospective clients are considering the upcoming second close, as the fund is offering an ‘early bird’ discount until September 2022.

Investors were attracted by the exciting potential market opportunity in commercial real estate debt, with spreads reaching 10-year highs as a result of the growing funding gap. Increased bank balance sheet provisions in light of expected Covid-19 related defaults have reduced the banks’ ability to provide new financing. Overall, the asset class can offer the potential for better yields relative to public corporate bonds, shorter tenors compared to many other private credit areas, as well as high quality security and robust covenants at an asset level.

Peter Hall, Partner at Momentum Investment Solutions & Consulting, added: “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.”

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. The industry-leading and transparent approach to providing liquidity has been a strong attractor for the offering.

The fund will take a sustainable approach to lending, using abrdn’s robust Fixed Income policy and proprietary Real Estate assessment tool. Based on a detailed analysis of the property, sustainable KPI’s will be identified and should a borrower demonstrate progress against the KPIs, they will be eligible for a discount on their spread/margin.  Influencing ESG improvements within Private Credit can be difficult given the ownership structure, so we are pleased to provide one solution.

CRED II will be managed by Neil Odom-Haslett and Martin Barnewell.  Neil is the Head of Commercial Real Estate Debt at abrdn and is also President of the Association of Property Lenders.

Craig MacDonald, Global Head of Fixed Income, abrdn, 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’re seeing in this space.”

The fund draws on the combined strengths of abrdn’s £113bn Fixed Income team, and the Real Estate team representing over £42bn of assets. abrdn’s wide-spanning Private Credit business has over £11bn in AUM and is well positioned to provide tailored solutions to clients’ long-term needs.

 

Ends

 

Media enquiries

Debbie Cowe,

Media Relations Manager, abrdn

Debbie.cowe@abrdn.com

+44 (0) 7711 774017

 

Notes to editors

At abrdn, we enable our clients to plan, save and invest for their futures.

We structure our business into three areas – and together they reflect our focus on enabling our clients to be better investors:

  • Investments: We work with clients to create solutions across asset classes, regions and markets globally – combining multi-layered research and market insights with technology and diverse thinking.
  • Adviser: We offer market-leading platform technology and tools that enable UK wealth managers and financial advisers to create more opportunity for their business and their clients.
  • Personal: We help people throughout the UK plan for their financial futures – through our financial planning business and our digital investing services.

Across our investments, adviser and personal businesses we manage and administer £542 billion of assets for our clients, and abrdn plc has over 1 million shareholders. (Figures as at 31 December 2021)

Our investments are built on an insight strength that comes from multi-layered research and a large global footprint. Our teams collaborate across multiple capabilities, to create forward-thinking solutions that aim to meet our clients’ needs and deliver more sustainable outcomes. Our investments business manages £464 billion on behalf of individuals, governments, pension funds, insurers, companies, charities and foundations (as at 31 December 2021) – with support and expertise from 800 investment specialists in over 30 locations.

abrdn is the single global brand for all areas of our business. In July 2021 our plc listing became abrdn plc. In September our investments business, formerly Aberdeen Standard Investments, became abrdn.

 

abrdn.com

 

Important Information

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The value of investments, and the income from them, can go down as well as up and you may get back less than the amount invested. Past performance is not a guide to future results. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. We recommend that you seek financial advice prior to making an investment decision.

The details contained here are for information purposes only and should not be considered as an offer, investment recommendation, or solicitation to deal in any investments or funds and does not constitute investment research, investment recommendation or investment advice in any jurisdiction. Any research or analysis used to derive, or in relation to, the above information has been procured by us for our own use, without taking into account the investment objectives, financial situation or particular needs of any specific investor, and may have been acted on for own purpose. No warranty is given as to the accuracy, adequacy or completeness of the information contained in this communication and no liability for errors or omissions in such information. Readers must make assessments to the relevance, accuracy and adequacies of the information contained in this communication and make independent investigations, as they may consider necessary or appropriate for the purpose of such assessments. Any opinion or estimate contained in this communication, are made on a general basis.   No information contained herein constitutes investment, tax, legal or any other advice, or an invitation to apply for securities in any jurisdiction where such an offer or invitation is unlawful, or in which the person making such an offer is not qualified to do so.

Issued in the UK by abrdn Investment Management Limited which is registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL and authorised and regulated by the Financial Conduct Authority in the UK.

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