Butterfield Asset Management has frozen its Liquid Reserve Fund Ltd., fuelling fears over the safety of investors' money held in the fund.

The fund took the decision to suspend subscriptions and redemptions this week.

The decision was made following a meeting of the fund's directors in a bid to protect shareholders' investments and will remain in effect until the market for the underlying investments stabilises.

The mutual fund, which was formed in April 1995 and is held in US dollars, closed at $10.16 per share with total assets of $38.25 million as of June 10, according to Bloomberg data.

Previously it had reached a price of $15.50 in late 2007, before dropping to just above $9 at the start of this year.

Its total assets declined by more than half-a-million dollars from $562 million at the end of October 2006 to its current figure today.

Meanwhile, the performance profiles between April 1999 and early 2009 show an up and down trend, while the risk profile from June 2008 to mid-2009 has steadily increased.

According to a Standard and Poor's ratings report from February 2009, the fund invests mainly in corporate floating and fixed-rate securities, as well as asset-backed securities (ABS), mortgage-backed securities (MBS) and a collateralised debt obligation (CDO).

Such asset classes have been badly impacted by the US housing crisis and the credit crunch.

Butterfield Bank was not in a position to comment on the matter at time of going to press yesterday.