Cambridge Place, the London fund manager, was forced to close its $908 million (£450 million) listed fund yesterday as contagion from the embattled US sub-prime mortgage market continued to spread to the UK.

There were signs that jitters about the high-risk mortgage-backed securities had also moved to the blue-chip market, when Carlyle Group, the American private equity firm, said that it would scale down the float of a fund invested in AAA-rated home loans because of investor nervousness about the credit markets.

Cambridge Place, which was established in 2002 by the former Goldman Sachs bankers Martin Finegold and Robert Kramer, said that it would sell the assets of Caliber Global Investment, a London-listed fund, after suffering a net loss of $8.8 million in the first quarter of this year.

Caliber has about 60 per cent of its investments in the US, mostly in mortgage debts rated BBB or below. These are securitised tranches of mortgages given to people with impaired or nonexistent credit histories.

Defaults on sub-prime mortgages have surged in America after lenders extended mortgages to people with increasingly weak credit ratings at the end of 2006 and the beginning of 2007 on the basis that climbing house prices would allow them, if necessary, to remortgage their property to meet repayments.

Instead, house prices plunged, forcing the borrowers to miss mortgage payments. The losses are passed through the capital markets to the funds that bought the securities.

Caliber’s investors will meet in August to vote on the asset sale, which is expected to take about a year. Cambridge Place has four hedge funds that buy similar securities, but their performances are not thought to have been hit as hard because they have a smaller proportion of their assets in the market and bought mortgages from 2004 and 2005 tranches rather than 2006.

Carlyle said yesterday that it would cut its fund offering on the Amsterdam exchange from $415 million to $300 million and reduce the price of the shares to $19 from the indicated range of $20 to $22. This would cause the fund float to be delayed for a week.

Meanwhile, several companies have announced plans over the past two days to scrap or postpone bond issues because of a lack of interest among investors in risky lending. Myers Industries, the plastic, rubber and metal products group, was the latest American company to withdraw a bond offering. The $350 million junk-bond issue would have helped to finance Goldman Sachs’s agreed leveraged buyout of Myers.

Catalyst Paper, the Canadian newsprint and speciality paper company, has scrapped a $200 million offering of junk bonds, citing “adverse” market conditions, and Arcelor Finance, the borrowing vehicle of the steel company being acquired by Mittal Steel, put off its plans to issue more than €1 billion (£670 million), again citing difficulties in the debt markets. In Malaysia, MISC, the shipping company, put its $750 million bond issue on hold.

Mervyn King, the Governor of the Bank of England, renewed his recent warnings that big lending institutions should be careful about their use of collateralised debt obligations, which parcel out bundles of corporate debt across markets.

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