Hedge fund firm Farallon Capital Management LLC is raising a new real estate fund of about $350 million to $400 million, the first time Farallon has sought to create a separate fund exclusively for the asset class, according to two sources familiar with the situation.

Though the fund will be dedicated primarily to real estate in the United States, it will have the ability to invest some capital outside the U.S.

Farallon is pitching the fund to its existing investors and is targeting a 20 percent internal rate of return, one of the sources, who was not authorized to speak publicly, said.

(Reporting by Ilaina Jonas)