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The fund, to be managed by Octopus Ventures, is designed to deliver strong returns to investors through investment into smaller unquoted UK companies.

The managers said this market sector had traditionally generated substantially higher returns for investors than those associated with larger UK-quoted companies.

The fund is targeted to raise £25m in the current tax year, giving it the potential to support up to 30 unquoted UK companies. Last year’s twin VCT launch raised more than £30m.

Simon Rogerson, chief executive of Octopus Investments, said: “VCTs are one of the most attractive investment opportunities, given the combination of substantial tax benefits they offer and the access they provide to what has historically been the UK’s best-performing asset class.”

The typical deal size will range from £500,000 to £2m, with the emphasis on opportunities within key market growth sectors. Risk will be minimised by ensuring the underlying investment portfolio encompassed a broad range of sectors, and no more than 10 per cent of all proceeds raised will be invested into any one company.

The managers said after the initial three-year investment period it was envisaged 75-85 per cent of all proceeds raised through Octopus Titan 3 would be invested across an underlying portfolio of between 20-30 unquoted companies. The remaining 15-25 per cent will be invested in a combination of cash, money market securities and other funds which Octopus manages.

The offer period closes on 3 April 2009.