UK – Legal & General Property's latest UK Property Income Fund has raised more than £138m (€165m) from seven international institutional investors, including a pension fund of the Royal Mail Group.

The fund follows on from UK PIF I, which raised £300m in 2010-11, but unlike its predecessor will invest in regions outside the southeast of England.

Legal & General Property said the first close for UK PIF II was the largest for a UK-focused real estate fund in 2013.

The fund manager hopes to have £750m – including leverage – to deploy by the end of the year.

UK PIF II has drawn on the track record of its predecessor, UK PIF I, in attracting institutional money from the UK, France, Denmark, Finland, Switzerland, Japan and the Middle East, four of the investors having backed the first fund.

UK PIF I is now fully invested, with assets under management of £430m.

The new fund is led by the same management team running UK PIF I and will focus on assets requiring specialist property management skills to reach their full potential, taking advantage of the yield gap that it believes exists, rather than relying on market movement to drive returns.

Legal & General Property will seek to construct a portfolio that will be well positioned to benefit from long-term economic recovery in the UK.

Charlie Walker, director of business development and manager of both funds, said that while UK PIF I had focused on southeast England as the driver of the economic recovery, the new fund would invest throughout the UK, in locations that were "strong" and sustainable for business.

"We are looking for occupiers with good connections, in locations with good transport links and where there is a good, employable labour pool," he said.

Like its predecessor, UK PIF II allows investors to choose their preferred level of gearing of between 0% and 50% loan-to-value.

The fund will pursue a core/core-plus strategy over seven years and is targeting returns of 8-9% for ungeared investors, and 12-14% for geared investors.

The fund’s investment strategy will include sustainability considerations, in line with Legal & General Property's conviction that sustainability is now one of the most critical agents of change in real estate ownership.