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Mon 22 Sep 2008 10:49 PM

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Investcorp launches $1bn US real estate debt fund

Unidentified sovereign wealth fund commits $850mn to investment bank venture.

Bahrain-based investment bank Investcorp said on Monday it had launched a $1 billion fund to take advantage of turmoil in US credit markets by buying real estate-related debt.

The Investcorp Real Estate Credit Fund, in which an unidentified sovereign wealth fund has committed $850 million, will acquire whole loans, mezzanine loans and commercial mortgage-backed securities collaterised by real estate assets in the United States, the bank said in a statement.

The fund aims to create between $2 billion to $3 billion of total investment capital.

"We believe there are strong opportunities for strong returns throughout the US real estate lending markets," Investcorp Managing Director Mazin Al-Khatib said.

The real estate credit fund is separate to a proposed $1 billion hedge fund a spokesman told newswire Reuters about in May. The hedge fund has yet to close, a company executive said on Monday.

The hedge fund's manager would include arbitrage specialist John Paulson, who made billions of dollars last year by betting against the US housing market.

Paulson's hedge fund group quadrupled in size last year on the back of the credit crisis, earning him a $3.7 billion pay cheque, ahead of industry legend George Soros.

Paulson manages about $30 billion and counts former Federal Reserve Chairman Alan Greenspan as an adviser.

Investcorp, which is listed in Bahrain and London and has offices in New York, specialises in investing Arab wealth outside the region and had more than $17 billion of assets under management as of June 30. (Reuters)