Aug. 10 (Bloomberg) -- Germany's largest mutual fund company said an investment fund that has no exposure to subprime credit lost 30 percent of its value since July because of customer redemptions.

Assets of the fund of DWS, owned by Deutsche Bank AG, fell to 2.1 billion euros ($2.9 billion) from 3 billion euros, spokeswoman Anke Hallmann said today. The DWS ABS Fund, registered in Luxembourg, hasn't halted withdrawals, she said.

Investors are shunning bonds backed by home loans after late mortgage payments by U.S. borrowers with poor credit histories rose to the highest since 2002. BNP Paribas SA, France's biggest bank, contributed to financial market turmoil yesterday by halting withdrawals from three investment funds because it couldn't value their holdings.

``This could get worse before it gets better,'' said Ben Yearsley, a financial adviser at Hargreaves Lansdown in Bristol, England. ``There could be many more problems yet to come for bond funds.''

Deutsche Bank's shares fell 3.41 euros, or 3.5 percent, to 95.19 euros in Frankfurt, after dropping as much as 7 percent. The 65-member Bloomberg Europe Banks and Financial Services Index declined 3.7 percent.

Fed, ECB

Central banks in the U.S., Europe, Japan and Australia added at least $131.3 billion to the banking system in an attempt to avert a crisis of confidence in global credit markets. The Federal Reserve, in a second day of action in concert with the European Central Bank, said it is providing reserves to ``facilitate the orderly functioning'' of markets.

Bear Stearns Cos. and Union Investment Management GmbH are among companies that froze redemptions from funds that invest in bonds backed by mortgages and other loans. Dutch investment bank NIBC Holding NV said yesterday that it lost at least 137 million euros on U.S. subprime investments this year.

Union Investment, Germany's No. 3 mutual fund manager, stopped withdrawals from one of its funds on Aug. 3 after investors pulled about 10 percent of the assets. Frankfurt Trust, the mutual fund manager of Germany's BHF-Bank, halted redemptions from a fund after clients removed 20 percent of their money since the end of July.

Two hedge funds run by New York-based Bear Stearns filed for bankruptcy protection in the Cayman Islands on July 31 following subprime losses. The New York-based securities firm then blocked investors from withdrawing money from a third fund.

Lumped Together

Many investors are lumping together all asset-backed securities, ``without looking at the ratings of bonds and their collateral,'' said Stephan Kunze, the European head of DWS. ``We have a very conservative portfolio and entered the current crisis situation with very high liquidity, so it's been possible for us to satisfy redemptions so far.''

Cominvest, Commerzbank AG's fund unit, isn't limiting redemptions from any funds in the face of withdrawals from three asset-backed security investments, Chief Investment Officer Ingo Mainert said today in a statement. Cominvest isn't directly invested in the U.S. subprime market, he said.

Deutsche Bank last year was criticized by politicians and competitors for freezing its German open real-estate fund rather than allowing investors to make withdrawals. The bank froze the fund in December 2005, citing the need to revalue properties, and later devalued it by 2.4 percent before reopening and selling real estate to make up for the lost returns.

The bank's experience with the property fund ``probably played a part in the decision'' to leave the ABS fund open, said Kunze. ``We've talked to several of our clients, got feedback from them, and then made the decision in the interests of our investors.''

To contact the reporter on this story: David Clarke in Edinburgh at dclarke3@bloomberg.net.

Last Updated: August 10, 2007 12:25 EDT