Barclays PLC (BCS) Wednesday sought to cut its exposure to volatile credit markets by selling $12.3 billion in risky assets to a new fund managed by two former Barclays executives.

The sale means Barclays will no longer have to record market moves in the value of a portfolio of securities backed by U.S. subprime mortgages and other poorly performing loans that already wiped more than a billion pounds off its profits in 2008. But it won't free up any capital because Barclays is extending the new owner, Protium Finance LP, a $12.6 billion loan to finance the sale, and will keep the securities on its balance sheet for regulatory purposes.

Loan interest payments to Barclays will come from the securities' cash flows, and the loan will be secured on the assets.

In exchange for what the bank hopes will be a less-volatile investment, Barclays is giving up any potential upside from securities that in many cases are still making interest payments, suggesting that it expects those payments to tail off over time and that capital wouldn't be fully repaid when the securities mature.

Group Finance Director Chris Lucas said Barclays has been collecting $100 million to $120 million each month in interest payments on the portfolio, but the interest rate on the loan will bring in annual returns of less than $400 million.

He declined to say what the face value of the securities is and exactly how much of that total Barclays has already written off.

"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," Lucas said.

Analysts said the move might be duplicated by other banks, especially those with large exposures to monoline insurers. The bulk of the assets Barclays is selling - $8.2 billion worth - are monoline insured. Monolines insure bonds against default.

Investors have long been concerned about the health of the monoline insurers and the effect on banks if they fail. Barclays' remaining monoline exposure totals about $6.78 billion, almost exclusively in securities backed by corporate loans.

"This gives Barclays a way to tidy up its monoline exposure, and anyone with significant monoline exposure could follow suit," said Simon Willis, an analyst at NCB Stockbrokers who called the transaction "sensible."

Tom Jenkins, a credit analyst at Royal Bank of Scotland, said it is a clever structure "but essentially smoke and mirrors" in the context of Barclays' GBP1.5 trillion balance sheet.

Barclays managed to avoid having to turn to the government for any support during the financial crisis by instead boosting its capital with cash from Middle Eastern investors and by selling its Barclays Global Investors unit to BlackRock Inc. (BK) for $13.5 billion.

Helping establish Protium Finance - whose manager, C12 Capital Management, is employing 45 former Barclays Capital staff - might also help revive asset-backed securities markets if other banks turn to it or similar vehicles to unload these kinds of investments.

Uncertainty about future losses on the securities has plagued banks since the credit crisis started two years ago.

Protium Finance's manager, C12 Capital Management, was founded 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.

The Cayman-based Protium fund has received a further $450 million in funding from two institutions, Barclays said. It declined to say who they were, but Lucas said one was based in the U.S. and the other in the U.K.

Barclays isn't investing in the fund or C12 Capital Management.

The $12.6 billion Protium loan 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 annual management fees of $40 million, plus expenses.

The interest rate is fixed at Libor plus 2.75%, which Barclays said should result in about $3.9 billion in total interest payments.

Shares in Barclays closed up 11 pence, or 2.9%, at 380 pence.

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

-By Margot Patrick, Dow Jones Newswires; +44 (0)20 7842 9451; margot.patrick@dowjones.com (Mark Brown contributed to this article.)