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An innovative investment fund which "recycles" funding is set to regenerate urban areas.

A £55m investment into projects in Welsh towns and cities will be repaid, creating a self-sustaining pot of cash.

The Regeneration Investment Fund for Wales (RIFW) invests European and Welsh Assembly Government funding and will be run by professional fund managers.

Wales is one of the first regions in Europe to establish a fund.

It is hoped that private finance will also be invested in the fund in the future.

The fund has been launched by the Welsh Assembly Government. Ministers say it will deliver new investment opportunities and also provide funding for many years into the future.

Spending on infrastructure and regeneration is likely to face cutbacks in the coming years as the UK Government tackles the budget deficit.

The assembly government said that RIFW will play an important role in ensuring that urban regeneration projects can still receive funding in the future.

Deputy Minster for Regeneration Jocelyn Davies said she was "delighted" Wales was leading the way in Europe with the RIFW.

"This is an important step forward in ensuring that the long-term regeneration of our communities is a success," she said.

"With the UK Government set to cut public spending, funding for projects like this will be increasingly difficult and so ensuring that this funding can go further is especially important.

"This innovative approach means that new investment opportunities will not only have a lasting legacy for the areas which are regenerated, but also the funding will be recycled so that more people and places can benefit in future."