Barclays PLC (BCS) Wednesday sought to reduce the effects of volatile credit markets by selling $12.3 billion in risky credit assets to a new fund called Protium Finance LP that will manage them and return their income to the bank in the form of interest on a $12.6 billion loan.

The loan to Protium - a new fund being managed by former Barclays executives - will be used to buy the assets and give the manager, C12 Capital Management, money to set up its operations.

Barclays will keep the assets on its balance sheet for regulatory purposes and therefore won't be able to reduce the capital it needs to hold against them, but it will no longer have to record market moves in the value of the assets.

"We are not seeking through the transaction to effect a change to our underlying credit-risk profile. But we are restructuring a significant tranche of credit market exposures in a way that we expect will secure more stable risk-adjusted returns for shareholders over time," Barclays Group Finance Director Chris Lucas said.

Protium's manager, C12 Capital Management, is being set up by Stephen King, the former head of Barclays Capital's principal mortgage trading group; and Michael Keeley, a member of the investment banking unit's management committee covering European financial institutions.

Barclays isn't investing in the Protium fund.

The $12.6 billion loan to Protium matures in 10 years and is secured on the credit assets. Interest payments will be drawn from income generated by the fund's assets after the managers collect fees and expenses.

Company Web site: http://www.barclays.com

-By Margot Patrick, Dow Jones Newswires; +44 (0)20 7842 9451; margot.patrick@dowjones.com