Hermes Investment Management is to launch its direct lending strategy after receiving the backing of an unnamed institutional investor.
The cornerstone investor, whose identity a spokeswoman for Hermes declined to reveal, will seed the fund with its initial capital ahead of its official launch later this year, once the structure has received regulatory approval.
Hermes will work with the Royal Bank of Scotland to source the UK senior secured loans, it added.
Patrick Marshall, head of private debt, argued that the UK senior loans market had offered stable returns over the past eight years, despite the financial crisis occurring over the period.
“The UK has the strongest creditor rights in Europe, which provides greater downside protection for investors,” he added.
Marshall joined Hermes last year with the aim of building up the BT Pension Scheme-owned asset manager’s direct lending capacity.
He previously worked at Tikehau Capital, responsible for the firm’s direct lending programme, and managed the loan book left in the wake of Lehman Brothers filing for bankruptcy.
Pension funds across Europe have shown increased interest in direct-lending programmes in recent years as an alternative to traditional fixed income.
In the UK, the Pension Protection Fund has begun building up a portfolio, and several large state-owned investors, including France’s Fonds de Réserve pour les Retraites, have grown their exposure.
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