June 28 (Bloomberg) -- Caliber Global Investment Ltd., a $908 million fund invested in subprime mortgage debt, will close as losses widen on defaulted U.S. home loans.

The London-listed fund, managed by Cambridge Place Investment Management LLP, will sell its assets and shut within a year, Caliber said in a statement today.

Caliber is the second U.K. fund this week to report fallout from rising defaults by American homeowners, following a $91 million annual loss for Queen's Walk Investment Ltd., run by Cheyne Capital Management (UK) LLP in London. Carlyle Group, the Washington-based buyout fund, cut the size of its initial public offering for a fund that invests in bonds backed by mortgages by 25 percent to $300 million today.

``The losses are going to be phenomenal'' for funds worldwide holding subprime debt, said Peter Schiff, president of securities brokerage Euro Pacific Capital in Darien, Connecticut. ``My guestimate in the subprime world is that the majority of loans are going to go into default. Not just 5 or 10 percent, but the majority.''

As of March, about 11 percent of the subprime mortgages included in bonds were delinquent by at least 90 days, in foreclosure or already turned into seized property, the highest since 1997 and up from 5.37 percent in May 2005, according to a June 1 report from Friedman Billings Ramsey Group in Arlington, Virginia.

Caliber will seek an ``orderly return of all of its capital to investors over the next 12 months in order to maximize value for shareholders,'' Caliber said in its statement. ``There is insufficient demand currently for investment.''

Bear Stearns

Buyers of bonds backed by mortgages to people with poor or limited credit histories stand to lose as much as $75 billion, according to an April estimate from Pacific Investment Management Co., manager of the world's largest bond fund.

Subprime defaults triggered the near-collapse earlier this month of two hedge funds run by the asset management unit of New York-based Bear Stearns Cos. The firm, the biggest U.S. broker to hedge funds, said on June 26 it won't provide financing to one of the funds after offering a $1.6 billion bailout for the other.

Cambridge Place was founded by former Goldman Sachs Group Inc. bankers Martin Finegold and Robert Kramer in 2002. Caliber, registered in the U.K. Channel Islands, invests in mortgage and asset-backed debt and about 60 percent of its investments are in the U.S., the company said in a May statement.

No Margin Calls

Last month, Caliber reported an $8.8 million second-quarter loss and appointed Lazard Ltd., the investment bank led by Bruce Wasserstein, to conduct a review of its business including investment strategy, policy and objectives.

Caliber's shares closed today up 24.5 percent, or 92 cents, at $4.70. The company's stock has fallen from a high of $12 in September 2005. The shares are trading below net asset value of between $6.50 to $6.60 per share, based on company estimates as of May 31.

The fund hasn't been subject to any margin calls since announcing results for the quarter ending March 31, the statement said. The decision to close followed discussions with major shareholders, Caliber said.

Caliber's shareholders include Deutsche Bank AG, which bought an 11 percent stake in the company in March, Bloomberg data show. Deutsche Bank spokeswoman Michelle Gathercole in London declined to comment.

At least eight companies postponed more than $3 billion of bonds this week because of a slump in investor demand for riskier assets.

-- With reporting by Jody Shenn in New York. Editor: Serkin (mes/ajr)

To contact the reporter on this story: Neil Unmack in London at nunmack@bloomberg.net

Last Updated: June 28, 2007 12:40 EDT