AIG Plans On Reducing Its Exposure To Hedge Funds

According to Bloomberg, American International Group Inc (NYSE: AIG) plans on reducing the number of hedge funds in which it is invested in by at least half.

Bloomberg, citing "people familiar with the company's portfolio," reported that AIG is invested in more than 100 funds and plans to lower its exposure to 50 or fewer. The report added that AIG is planning for increased volatility that may pressure risky assets as well as a possible period of limited liquidity in the financial markets.

AIG's CEO Peter Hancock told investors during a presentation on January 26 that the company plans on lowering its exposure to hedge funds but didn't offer any concrete details at that time.

AIG has an investment portfolio of more than $340 billion, mostly in bonds. The company's hedge fund holdings is around $11 billion.

"We had a very negative experience in hedge funds," Bloomberg quoted Hancock as saying during his presentation. Shifting the allocations will "lead to a much better return on risk and especially return on capital."

Hancock will work with AIG's newly appointed Chief Investment Officer, Doug Dachille, a former JPMorgan executive whose positions included co-treasurer and global head of proprietary trading.

Finally, Bloomberg pointed out that its sources didn't specify what funds AIG plans to exit and a total dollar amount.