The 10 Biggest UK Funds Launched To Raise Capital For A Post-Pandemic World
Real estate debt and residential are key targets for the managers that started raising funds in 2020 and 2021, though others are still betting on the future of offices.
Data from Preqin shows that the 10 largest funds in the market that were launched in the past year are looking to raise a combined £2.95B. Here’s who will have capital to deploy in the coming months.
DRC UK Whole Loan Fund II
Debt fund specialist DRC is looking to take advantage of caution in the lending market from traditional lenders with a new fund. The DRC UK Whole Loan Fund II will provide debt at higher loan-to-value ratios than banks and institutional investors, which typically provide a maximum of 60% LTV. The fund, launched in 2020, has a target size of £500M and has already raised £145M.
Commercial Real Estate Debt Fund III
Octopus Group is looking to build on the success of its first two commercial real estate debt funds, which both made good returns providing small short-term loans to investors and developers. Its third such fund launched at the beginning of this year and is looking to raise £425M, which with capital recycling would allow it to lend around £1B.
Arlington Student Accommodation Fund
Student accommodation specialist Arlington launched a fund dedicated to the sector at the beginning of this year with an equity target of £400M. The market will watch with interest the appetite from investors for a sector that has seen income drop as a result of universities switching to remote learning during the pandemic.
Yoo Capital Fund II
Investment manager Yoo Capital has raised £200M of its targeted £400M for a fund looking to buy sites for mixed-use developments in London. A circular for the fund said it is targeting returns of 20% to 25% and will use leverage of 65% to 75% of the cost of its developments. The fund completed its first deal in September, buying a 75% stake in the Shepherd’s Bush Market mixed-use scheme in west London.
Man GPM RI Community Housing Fund
In 2019 hedge fund manager Man Group announced it was moving into the UK social and affordable housing sector, and in mid-2020 it began raising £400M for its first fund in the area. According to documents from Glasgow Council, one of the fund’s investors, it will buy and develop social and affordable housing that will then be leased back to local authorities and housing associations. It will target returns of 4% to 10% and have a life span of 10 years, with the option to extend for another five. Glasgow said it would invest £30M in the fund, and Homes England and Big Society Capital are also lined up as investors. Man Group itself is investing £10M.
Hearthstone Residential Fund II
Residential specialist Hearthstone Investment Management raised £200M for its first residential fund, and in 2020 it launched a follow-up looking to raise £300M. In November it announced it had raised £97M in a first close for Hearthstone Residential Fund II, which buys houses and small blocks of flats from housebuilders, which it then rents out to tenants.
PfP Capital MMR Fund
PfP Capital launched its mid-market rent fund in 2018, looking to raise £160M to develop up to 1,000 rental homes in Scotland. Having raised £140M by 2020, it decided to up its equity target to £240M in the immediate term, a target that could grow to as much as £400M over time.
Elite UK Commercial Fund III
Singaporean investment manager Elite Partners believes in the future of UK offices: It is raising £200M for a new fund to buy office assets across the country. The fund held an interim closing that raised £40M in 2020, which it used in September to buy a £70M portfolio of four offices in Glasgow, Nottingham, Greater Manchester and London. The offices are all predominantly leased to UK government agencies, Elite’s preferred investment strategy.
Resonance Supported Homes Fund
Social impact investment firm Resonance is looking to raise £100M for a fund that will buy homes that are leased to learning disability and mental health charity partners and specialist housing providers that rent them to individuals with learning disabilities, autism and mental illness. A first close raised £5M each from the Greater Manchester Combined Authority and social impact investor Big Society Capital.
Treos Partners
Trinova is another investor betting on making money in offices: Its Treos Partners vehicle is raising £100M to buy and lease up offices across the UK, with the idea of making value-add returns of 13%-plus.
