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AIG lost $349m in hedge fund portfolio in Q1

Wednesday, May 04, 2016

Komfie Manalo, Opalesque Asia:

Large US insurance group AIG lost a net $183m for the first quarter 2016, year-on-year. The group blames the loss on the impact of market volatility on investments, as well as net realised capital losses and restructuring costs.

Its hedge fund portfolio made a net loss of $349m, and the private equity portfolio returned $74m.

AIG’s CEO Peter Hancock said on Bloomberg TV that hedge fund strategies "take $10-$11bn out of a portfolio that has about $350bn in total; they just happen to be the most volatile. We gave notice to about half the hedge funds at the end of last year, to those we wanted to exit. So in the course of this year, we’ll be exiting, as the lock-up periods expire… That frees up capital that can be deployed in our core business, which is underwriting insurance risk. It’s really part of a broader strategy to focus AIG on what we do best, which is insuring the risk of our clients."

He added that his private equity portfolio will not be shrunk as much as the hedge fund portfolio, as this portfolio does not create as much volatility and is less liquid. The overall investment portfolio will decline in its significance to the insurer’s results going forward, he said, relative to the underwriting. And the company will shift its investments into defensive fixed income, largely investment grade bonds.

AIG said in February that it would exit at least half its hedge fund portfolio, which has around 100 funds, in the belief t......................

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