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Oxford University has revealed that it will raise £750m from its first bond issue - the biggest amount raised this way by a UK university.

It is the most significant example so far of universities turning to the capital markets for investment rather than student fees.

It will mean more funds will be raised from these loans than Oxford's research funding from last year.

The university says it will use the money for improving facilities.

The bond means the university will receive funds from investors, which will be repaid after 100 years, with an annual interest rate of 2.54%.

Tuition fee uncertainty

The amount is higher than had been anticipated, after a starting point of selling bonds worth £250m. It is understood that the bond offer was heavily oversubscribed, with £2bn of funds offered by investors.

It will be seen as a long-term, low-risk opportunity for investors, but also a further shift in university finances.

With uncertainty about tuition fees and government funding, universities have increasingly begun to turn to raising money from private investors.

Oxford says it will give them "confidence and freedom" to spend on major developments, with plans to invest £1.5bn in building projects over the next 10 to 15 years.

This will be substantially bigger than any other UK university bond issue so far, but Cambridge, Leeds, Manchester, Cardiff and Liverpool are among the institutions which have previously raised money this way.

Individual Oxford colleges have also issued bonds, but this is the first time that the university itself has made such an offer to investors.

It means borrowing to raise cash in the short-term and paying back in the long-term, with the funds often used for capital projects, such as new buildings, libraries or overhauling facilities.

It is also likely to raise questions about richer universities using investment markets to create an even wider wealth gap with other institutions.

The Moody's credit rating agency this week gave Oxford its highest Aaa rating - citing its "extraordinary market position".

Moody's reported that this reflected the strong demand from students, significant research funding and an endowment worth £2.6bn.

The credit rating agency said that Oxford's research income last year stood at £730m, a figure overshadowed by a single entry into the investment market.

The university's vice-chancellor, Professor Louise Richardson, said the rating was "gratifying testament to the belief of the outside world in the extraordinary institution that has been developed over the centuries".

"It is our responsibility to ensure that we use the opportunities accorded us by this bond to pass on to our successors an even stronger university."