Nov 7 (Reuters) - UBS Group is winding down

investment funds run by its hedge fund unit O'Connor, it said on

Friday, after suffering losses due to exposure to bankrupt U.S.

auto parts supplier First Brands Group.

The liquidation comes after UBS CFO Todd Tuckner said in

October the bank was moving ahead with O'Connor's sale to U.S.

brokerage Cantor Fitzgerald.

He had acknowledged that the bank is "working through"

whether funds with First Brands exposure would be included in

the transaction.

"We informed investors last month that O'Connor's Working

Capital Opportunistic funds are being wound down and the

majority of the funds' assets will be monetized by the end of

the year," a UBS spokesperson said.

"As a priority, we're taking steps to protect clients'

interests and maximize recovery of the remaining First Brands

Group-related positions through the complex bankruptcy process,"

the spokesperson said in an emailed statement to Reuters.

First Brands filed for bankruptcy protection in September

after disclosing liabilities exceeding $10 billion.

UBS has more than $500 million in exposure to First Brands

across several investment funds, including those managed by

O'Connor, according to U.S. court filings.

The Swiss bank emphasized during its third-quarter earnings

that it has no balance sheet exposure to First Brands and that

the affected funds, targeted at sophisticated investors with

clear risk disclosures, breached no investment guidelines.

UBS' plans to wind down its funds with First Brands Group

exposure were first reported by The Financial Times on

Thursday.