U.S. private equity giant Apollo Global Management has raised $1.4B of equity for a new European opportunity fund.

Last week Apollo filed documents with the U.S. Securities and Exchange Commission that show the firm has raised the equity for Apollo European Principal Finance Fund III. It began raising the capital last year, and has a target size of $4B for the fund.

Apollo is a giant in the buyout arena, but is looking to build its real estate business to rival Blackstone or Carlyle in size.

In spite of being smaller, Apollo’s real estate business has made stellar returns — the predecessor European property fund is recording a gross internal rate of return of 19%, according to the company’s quarterly report. That fund made hay buying distressed loan portfolios and asset from banks in countries like the U.K., Ireland, Germany and Spain.

Apollo, whose European business is run by Roger Orf, has had some significant successes in terms of sales recently, selling a German portfolio it bought near the bottom of the market to listed firm Aroundtown Holdings for €1.2B. 

Documents filed by one of the investors in the fund, U.S. pension fund Pennsylvania Public School Employees Retirement System, highlight its strategy. The filings show that Apollo feels that although many banks in Europe have completed their sell-off of distressed loans and assets, opportunities will still arise.

Apollo was an underbidder in the transaction that saw Blackstone buy a 51% stake in a portfolio of distressed assets from Spanish bank Popular for €5B earlier this month.

“EPF III will continue the strategy of its two predecessor funds by  acquiring NPLs (nonperforming loans) and non-core assets from European financial institutions,” PSERS said in a note explaining why it had decided to invest in the fund. “Apollo expects that the fund will be opportunistic across asset types and geographies, but will primarily focus on five key countries: the U.K., Ireland, Spain, Germany and Italy. 

“The EPF team seeks to build a diversified portfolio of 30 to 35  investments that require around $100M to $300M of equity per deal with two to four-year average hold periods.”

In Germany the fund will focus on commercial real estate, while in Ireland and Spain it will buy nonperforming loans. In Italy it will buy distressed real estate and in the U.K. it will look for opportunities arising from sales that result from Brexit.

The note added that the fund was targeting low to mid-teen returns.