AIG Investments fate clouded by sprawl, government

The ability of insurer AIG, which was today bailed out by the US government, to seek liquidity through the sale of its asset management arm will be slowed by US government ownership, by the scope of the firm’s operations, and because the firm manages AIG balance sheet capital as well as client funds.

The future of AIG Investments is viewed by market insiders as a complicated matter following an $85 billion (€60 billion) bailout of parent company AIG that has given the US government an 80 percent ownership stake in the insurance giant.

AIG Investments is mammoth, with $758.2 billion in assets under management including $25.7 billion in real estate equity under management as of June 30. In addition to the firm's real estate arm, AIG Global Real Estate, the group has platforms for private equity, including secondaries and infrastructure, equities, fixed income and hedge funds.

Some $621 billion of AIG Investments’ assets are AIG-affiliated, although alternative investments have a proportionally greater level of client assets. Of $46.2 billion in alternatives, $17.9 billion are client assets, according to the group’s website.

“There are a few pockets [within AIG Investments] that can function independently and have third party capital, but not too many,” said a secondary private equity investor familiar with AIG Investments. The situation is further complicated by the fact that AIG’s buyer is the US government.

“Given the government receivership, AIG assets will probably have to go through an auction which means a long process that will take months to even hit market,” said the same investor.

AIG Global Real Estate’s property portfolio comprises more than 53 million square feet of retail, residential, industrial, office and hospitality properties in more than 50 countries. Led by Kevin Fitzpatrick, AIG Global Real Estate has offices in New York, Dubai, Hong Kong, London, Los Angeles, Mexico City, Moscow, Mumbai, San Francisco, Seoul, Shanghai, Singapore and Tokyo. 

Further clarity as to the future of the asset management business can be expected on September 25 when AIG is expected to produce a strategic plan to model asset sales and the paying down of debt, according to a report from Citigroup’s global markets equity research group.