The business aims to capitalise on the apparent reluctance from the high street banks to lend to smaller businesses by offering new senior and subordinated loans of up to €100 million (£85 million) to European SMEs that are seeking finance for acquisitions, capital growth, restructuring and liquidity.

Founded in 2001, London-based BlueBay is a wholly owned subsidiary of Royal Bank of Canada and manages fixed income credit funds and products in Europe, with assets under management of €32.2 billion.

The firm has more than €400 million from its existing funds for the new venture, and is currently raising more dedicated financing from investors. In the American-styled venture, loans worth between €20 million to €100 million will open to SMEs in the UK, Germany and Northern Europe.

Anthony Fobel, previously a partner at Och-Ziff Capital Management, will head the business, which the firm says is a ‘significant product extension’ from its existing high yield and leveraged loans business.

An initial, closed-end, direct lending fund, which is expected to be the first in a series of similar funds, will be launched next year.

BlueBay chief executive Hugh Willis comments, ‘With the banking system post-2008 continuing to limit European SMEs of credit, BlueBay, together with RBC Global Asset Management, considers this new business initiative to be an important one.

‘Not only does it represent a compelling opportunity for investors, it also provides a fresh source of finance for European SMEs at a time when this is needed.’

Fobel, adds, ‘BlueBay’s Private Lending business, through its existing and new dedicated funds, will provide much needed capital solutions to European SMEs.

‘While increasingly commonplace in North America, this form of private capital funding is a relatively new development for the European asset management industry.’