Harbor Group International, a privately owned real estate and management firm, said Wednesday it raised ~$1.6B in capital commitments for its Multifamily Credit Fund, which will invest in a variety of debt instruments financing U.S. apartment buildings.

A subsidiary of the Canada Pension Plan Investment Board has committed to $585M, marking the giant pension plan’s third investment with HGI since 2019.

The fund is being formed against a backdrop of climbing interest rates as the Federal Reserve vows to keep its policy rate elevated as long as it takes to beat down inflation. HGI said the fund is seeking to “achieve attractive risk-adjusted returns” through investments in U.S. multifamily credit, including senior mortgage loans, Freddie Mac K-series bonds, preferred equity and mezzanine debt investments, and investments in securitized multifamily mortgage products.

“The fund is uniquely positioned to build on HGI’s track record both as an investor in multifamily credit strategies and as a multifamily operator with a large national portfolio,” said HGI President Richard Litton. “We also expect to benefit from the current rate environment as we seek to achieve positive returns for our investors.”

Meanwhile, Geoffrey Souter, managing director and head of Real Assets Credit at CCP Investments, said he sees multifamily credit investments “as resilient assets that are well positioned to drive strong returns for the CPP Fund over the long term.”

More than 80% of HGI’s portfolio is made up of multifamily-related investments.

Rising interest rates and fear of a recession is expected to weigh on commercial real estate deal activity in 2023, CBRE said earlier this month.