Real estate investment manager AEW has raised £171M for a new retail fund.

The fund is a rare example in recent years of a real estate vehicle targeting the battered UK retail sector. It has secured a £30M debt facility in addition to the £171M of equity at its final close.

The new fund will be aimed at urban assets covering the south of England as well as major UK cities such as London, Manchester and Birmingham. It will target value-add returns.

According to AEW, the Urban Real Estate Fund has secured commitments from a number of unnamed institutional investors and had so far invested £133M into retail assets across the UK.

The fund had acquired nine sites and was in talks to acquire a further three schemes worth just over £16.2M.

“As the UK high street accelerates its shift away from retail towards mixed-use units, there is an opportunity to repurpose assets and support the regeneration of town centres," AEW Managing Director and Senior Portfolio Manager, UREF, Nick Winsley said.

The final close of the new fund comes against a worsening market sentiment in the UK as inflation impacts consumer spending and interest rates rise.

The average cost of debt for real estate in Europe hit 4.8%, the highest since 2007, according to figures from Bank of America.

AEW, however, remains undeterred with its new fund. In a research note in June it said it expected shopping centres to outperform other real estate sectors in the next few years.

“We are excited by the opportunity that currently exists in the sector and the ability to support social change in the urban environment, working with local authorities and key stakeholders." AEW Director and Portfolio Manager, UREF, Charlie Royle said.

"Through careful investment and diligent asset management we aim to secure the fund’s target returns for our investors, whilst addressing the needs of local communities.”