Friends Life, one of the largest insurance and pensions providers, is set to fund the commercial mortgage arm of Pramerica Investment Management, an asset management business which is part of the US-based Prudential Financial Inc.

The funds will be distributed via Pramerica’s London-based mortgage business, Procoa Mortgage Capital Company, into the UK economy.

The aim of the investment is to tackle the commercial real estate loan market in the UK, using senior secured, fixed rate loans with maturities of between five and 15 years. 

Commenting on the new funding line, Michael Jameson, Head of Pramerica’s commercial mortgage institutional funds management business, said: "There is a growing demand among commercial property owners and borrowers in Europe to seek financing from well-established, experienced global lenders.

“That demand, combined with the strategic opportunities available in the current economic climate, is why we entered Europe. We are proud that an established firm such as Friends Life has chosen to work with us, and we look forward to providing them with the same high quality service and flexibility our clients have come expect."

Friends Life believe an allocation to this field will increase returns and sustainable cash generation, by delivering more value in the annuity book.

Friends Life’s funds do not currently have a material exposure to commercial property rental flows, so adding commercial real estate loans to its portfolios adds a new dynamic to the company’s current offerings.

Speaking on the announcement, Mark Versey, Chief Investment Officer at Friends Life, said: "We are very pleased to begin this new relationship with Pramerica’s mortgage business. After extended analysis of our annuity fund portfolios, we identified CRE loans as an attractive alternative source of assets to effectively meet the ongoing needs of the funds. Pramerica demonstrated their expertise in managing this asset class and we look forward to working with them going forward."