M&G Investments has launched its first fund to invest in long-lease continental European real estate.
The M&G European Secured Property Income Fund offers institutional investors inflation-linked income through investment into real estate leased to tenants over the long term, providing a gross yield of 5.8% with a weighted average term of 34.5 years.
The open-ended fund received €265m ($295m) of initial commitments from five European institutional investors, M&G told Insurance Asset Risk.
The fund has already made two investments for a total of €100m: one in supermarkets in Portugal, and another in a health club in Belgium. There are two more deals in Germany and Ireland in the pipeline, for a total of €30m.
"A new European financing landscape is emerging following the financial crisis, where pension funds and institutional investors, the natural owners of long term capital, are providing long-term finance where banks previously dominated the market," Simon Pilcher, chief executive, fixed income at M&G, commented. "European companies are beginning to seek alternative ways to raise finance, with sale and leaseback being an increasingly popular option."
M&G has already gained experience in long-lease real estate investing through its £3.2bn UK strategy, the M&G Secured Property Income Fund, launched in 2007, and through its investments in European real estate over the last 15 years. Ben Jones, who manages the UK fund, will also manage the European fund.
M&G Investments is the London-headquartered investment arm of Prudential plc in the UK and Europe. M&G manages more than £247.5bn ($352bn) in assets through investment strategies across equities, fixed income, real estate and multi asset.