Caerus taps into long term megatrend with €300m new debt fund

The Düsseldorf-based Caerus Debt Investments is looking to raise €300m for a real estate debt fund as part of its senior/whole-loan strategy.

Caerus has structured the vehicle as a pool fund, which will target senior collateralised loans with a loan-to-value ratio of up to 80%. The geographical target for the Caerus Real Estate Debt LUX SICAV-SIF fund will remain the eurozone, concentrating on Germany, Austria, Switzerland and the Benelux countries. The target IRR is 3-4%, with a first close planned for the end of October 2016.

Investors can participate via a new sub-fund called Archimides with a minimum subscription amount of €10m.

According to Caerus founder and CEO Michael Morgenroth, “For insurance companies, no other asset class currently offers a more attractive risk/return ratio and a higher return in relation to the equity securitisation required by Solvency II.”

Institutional investors have already awarded Caerus around €800m in senior/whole-loan strategies, of which €700m has been placed so far.

Among Caerus's biggest mandates is that of German insurance company Volkswohl Bund, which last year followed up on its initial €200m commitment, made earlier in 2015, with a further €300m.

REFIRE: Caerus has positioned itself at the epicentre of the clashing of two opposing forces – which are fundamentally changing the business models of the big banks and the insurance companies. Where ten years ago the notion of the one-stop finance house was all the rage, with banks offering insurance and insurers such as Allianz taking over banks such as the now-defunct Dresdner Bank, that concept has fallen very much out of fashion.

Both banks and insurers are having to confront the dilemma posed by extremely low interest rates and the barrage of new regulation with which they have to comply. As Caerus CEO Morgenroth reminded REFIRE again in a recent meeting at the Expo REAL, both banks and insurers are having to rebuild their capital bases in the shadow of Basel III for the banks and Solvency II for the insurers. Basel III comes into force in 2019, with banks fearing even more stringent measures coming down the 'pike, while Solvency II kicks in this year with a 16-year notice period for insurers to fully comply.

With insurers unable to earn the required returns on fixed income instruments such as bonds to meet their long-term obligations – which are often up to 4% on life insurance policies – they are being forced to encroach on the banks' traditional lending turf. Banks are having to curb their lending to comply with the new capital requirements.

Ergo, as Morgenroth reminds us, insurers have little option but to get more involved in property, project development, infrastructure and even corporate investment. German insurers increased their lending to the property sector in 2015 by 41% over 2014, and the trend, certainly to go by market developments in the US, is clear.