Barwood Capital has launched a £50m (€68.8m) UK regional commercial property fund.

The investment manager said the new vehicle would take advantage of the “positive arbitrage between primary and secondary assets” in the UK regions.

With leverage and reinvested capital, the five-year fund will have an investment capacity of £200m.

Barwood said it was targeting an annual investor IRR of 15% for the fund, with fundraising due to close in April.

Current investors in Barwood’s existing funds backed the new vehicle with £25m.

The firm’s executives will co-invest more than £1m in the fund, which will target UK regional assets worth between £3m and £20m.

Joanna Greenslade, managing director of Barwood Capital, said the firm had identified a pipeline of assets.

She said: “Against a backdrop of a recovering economy and increasingly liquid market for high-quality UK regional assets, we will look to identify underperforming assets before adding significant value, through letting up vacant space and achieving implementable planning permissions or programmes of refurbishment and development.”

The fund has been set up mainly for high net worth individuals and professional and institutional investors.

Barwood said yields for secondary stock outside London remained “significantly higher than prime assets”, with a spread of 4% between prime and secondary stock yields.

Barwood recently announced it had entered a logistics joint venture with Delancey.