AIG ends five decades of private equity investing

The struggling insurance giant has sold its private funds unit, including secondaries, co-investment and infrastructure assets worth nearly $89bn, for just $500m, as it works to pay off about $180bn in government bailout money.

American International Group is dissolving its private funds holdings, officially ending nearly five decades of investment in the alternative asset class. It has raised more than $45.6 billion in private equity capital since the 1960s, for funds focused on countries across the globe, and at one time had more than 200 private equity professionals in 24 offices worldwide.

Bridge Partners, the investment firm of Hong Kong billionaire Richard Li, has agreed to buy the bulk of AIG’s private funds unit, including secondaries, co-investment and infrastructure assets, for $500 million. The $500 million sale price comprises a cash payment of $300 million, with the balance including performance-based payments.

AIG may have some remaining private equity interests, but a source said the company “does not have the intention of retaining its private equity group”, which dates to the 1960s.

The deal represents a portion of AIG’s asset management and investment advisory business that includes private equity, hedge funds of funds, fixed income and listed equities. The portion of the business being sold has $88.7 billion in assets across a range of AIG-branded funds including private equity funds of funds AIG Private Equity Portolio, AIG Asia Infrastructure funds, AIG African Infrastructure Fund and AIG Altaris Health Partners. AIG will continue to receive carried interest in some of the funds.

Bridge Partners will retain the asset management group’s management team, including chief executive officer Win Neuger, while AIG said in a statement it will retain an “in-house” asset management business with $480 billion in assets. AIG declined to comment beyond its statement.

AIG has been selling assets to pay back a government bail out that has ballooned from an initial $85 billion to about $180 billion as of the end of June, according to the Wall Street Journal.

In August 2008, AIG closed a Brazil fund on $692 million, exceeding its original $400 million target. The company was raising a private equity fund of funds, AIG Private Equity Portfolio V, last year targeting $750 million, but it is unclear if the fund closed and on how much. The Town of Greenwich Retirement Board committed $5 million to the fifth fund last year.

The sale does not include AIG's private equity real estate funds, which the company has “positioned” for a sale, a source told sister news website PrivateEquityOnline.