Butterfield Bank moved to assure investors in its Carlyle Group private-equity partnership fund that their investments have no exposure to the buyout specialists' mortgage-linked fund that was suspended from trading last Friday.

Carlyle Capital Corp. (CCC), the Group's mortgage-bond fund, was suspended from Amsterdam trading on Friday after it failed to repay lenders, who in turn sold assets held as collateral.

Bear Stearns Cos. analyst Keith Baird warned in a note to clients that the fund could expects more margin calls, which would deplete capital, and that the pool may be liquidated and the stock left worthless.

The problems are related to the collapse of the US sub-prime mortgage market.

Carlyle Group is the world's second-biggest leveraged-buyout firm by assets and has averaged returns of more than 30 percent annualised over the past 20 years.

In June last year Butterfield Asset Management Private Equity I, Limited Partnership was launched by Butterfield Bank to help meet growing demand for alternative investments.

A minimum commitment of $250,000 is needed to invest in the fund — a snip compared to the $35 million or so minimum that would be needed to invest directly in the Carlyle Group.

On Saturday, a Butterfield bank spokesperson said: "The BAM Private Equity Partners I, Limited Partnership does not have any exposure to Carlyle Capital Corporation. CCC is a publicly traded company with its own shareholders and none of the four underlying funds that BAM Private Equity Partners I are invested in has any exposure to it."

CCC's blow-up is a rare set-back for Carlyle founder David Rubenstein, who created the fund and tapped public markets for $300 million as part of efforts to expand his Washington-based firm beyond leveraged buyouts. Though not obligated, Carlyle Group has extended $150 million in credit to Carlyle Capital since August. It hasn't said how much of that has been used.

If Carlyle Group doesn't provide more financing, the fund "could be forced into significant asset sales into a weak market or could face bankruptcy," Citigroup Inc. analysts including Donald Fandetti in New York wrote yesterday in a note to investors.

Carlyle Capital is "considering all options," the fund said in its statement. Carlyle Group, which has about $30 billion in uncommitted capital across its funds, has no financial ties to Carlyle Capital beyond the $150 million credit line.

"We believe the challenges facing CCC will have no material impact on the Carlyle Group or any of Carlyle's other funds," Carlyle spokeswoman Ellen Gonda said on Friday.

CCC plunged 58 percent yesterday to $5 after first disclosing it couldn't meet lenders' demands for more collateral to offset a decline in its holdings. Carlyle sold the shares for $19 in an initial public offering in July.

The fund, run by John Stomber, originally delayed and then cut the size of the IPO by about 25 percent as the sub-prime contagion began. It then added the money raised in July to a private $590 million pool opened in 2006. For every dollar of equity, the pool borrowed $32.

Guernsey-based Carlyle Capital bought about $22 billion of AAA rated mortgage debt issued by Fannie Mae and Freddie Mac, notes that it says have the "implicit guarantee" of the US government.