UPDATE 3-Barclays restructures $12 bln of risky assets

* UK bank sells monoline, RMBS assets to Protium fund

* Says deal provides more stable returns

* New fund run by ex-BarCap bankers; 2 big outside investors

* Barclays shares up 3 percent

(Adds comments from finance director, analyst, details)

By Steve Slater

LONDON, Sept 16 (Reuters) - British bank Barclays Plc (BARC.L) said it has sold $12.3 billion of credit market assets to a new vehicle backed by outside investors, effectively ring-fencing some of its riskiest assets.

The new fund, Protium, will be supported by $450 million of new funding and a $12.6 billion loan by Barclays itself.

The assets will remain on balance sheet, but Barclays said it would restructure a big tranche of credit market exposures in a way that will secure more stable risk-adjusted returns for its shareholders over time.

The sale brings in investors with an appetite to share risk exposure to the assets, such as its monoline assets, and who will share the cashflows arising from the assets.

The assets will be sold at current fair values and Barclays said it expects it will neither book a gain nor a loss.

Barclays shares closed up 3 percent at 380 pence, outperforming a firm UK stock market.

"It's being presented as providing a more stable, certain outturn, but you could argue they are giving away the upside but not really being sheltered from much of the downside," said Ian Gordon, analyst at Exane BNP Paribas, citing a limited capital cushion at Protium.

Barclays Finance Director Chris Lucas said a deterioration in the assets would be first absorbed by cashflow from the assets, then further losses would impair the loan and then eat into Protium's capital.

The main benefit of the deal was the more stable returns, he said, estimating that interest on the loan should deliver $3.9 billion over its 10-year lifetime.

MONOLINE RISKS

"It's not really changing anything fundamentally in terms of their credit risk but it should mean that the effect on the P&L (profit and loss) is much more predictable than it would have been," said Simon Adamson at CreditSsights.

"The idea is they get paid interest on the loan that is secured on these assets and therefore they shouldn't have so much volatility."

Barclays said the deal will mitigate the potential impact of short-term movement in market values and monoline downgrades.

Protium is run by C12 Capital Management, an independent asset management firm run by two former bankers from Barclays Capital -- Stephen King was head of BarCap's Principal Mortgage Trading Group and Michael Keely was a member of BarCap's management covering European financial institutions.

Protium has two substantial investors, one from Britain and one from the United States, Lucas said. Neither Barclays nor any of its staff were investors, he said.

About 45 employees had joined Protium from BarCap, he said.

The assets sold by Barclays include $8.2 billion of structured credit assets insured by monoline insurers, $2.3 billion of assets backed by U.S. residential mortgage backed securities and $1.8 billion of mortgage assets.

Merrill Lynch, now owned by Bank of America (BAC.N), and Swiss bank UBS (UBSN.VX) last year sold risky mortgage assets to asset managers, also providing most of the funding to the buyers. (Additional reporting by Douwe Miedema and Jane Baird; Editing by Elaine Hardcastle and Mike Nesbit)