Aviva platforms team up to work on senior debt launch

New core-strategy fund would invest both third-party and in-house capital

Aviva’s investment management and commercial lending arms are teaming up to explore the launch of a senior debt fund. Ben Stirling, European real estate managing director at Aviva Investors, and Adrian Poole, origination manager at Aviva Commercial Finance, have been tasked with developing the fund.

The new vehicle could raise several hundred million pounds in third-party investments, alongside Aviva in-house capital. It would have a core strategy and make loans of five to 10 years.

Aviva believes it has an advantage over some of the other dozen or more managers looking at senior debt strategies because it already has an experienced loan origination and servicing team in place, with a successful 30-year track record.

Although Aviva Commercial Finance mainly originates long- term loans to match the long-term liabilities of Aviva’s annuity book, it sometimes also lends for shorter terms, when an internal fund has the appetite.

The team, led by Kevin Sale, has extensive contacts and a new product would allow them to offer new and existing clients  potential opportunities to borrow shorter-term money, as well as its traditional long-term, amortising lending.

The move comes as competition increases in Aviva’s traditional lending market from insurance companies coming into the UK and European lending market, which like to lend over the long term.

Legal & General, Pricoa Mortgage Capital, AIG and Cornerstone (the latter on behalf of Mass Mutual) have all made their first UK loans this year.

Few debt funds have been raised yet for senior lending, although several institutions, including Henderson and M&G Investments, announced that they were capital raising earlier this year.

AXA REIM recently announced a new round of fund raising for its commercial real estate debt programme, which will take it to €7bn by the end of the year (see above), while AEW Europe has had a first closing for a senior debt fund and made its debut loan.