iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
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AIG to Exit Half of Their Hedge Fund Investments, Cites ‘Very Negative Experience’

Poor hedge fund managers are going to need to ease up on the construction of their mega mansions, if this keeps up.

AIG has had enough and won’t take the losses anymore. They’re pulling $5.5 billion or so from their hedge fund investments, rightfully so.

AIG had about $11 billion dedicated to hedge funds as of the third quarter, and returns on the holdings have slumped in recent months. Chief Executive Officer Peter Hancock said at a Jan. 26 investor presentation that the company intends to lower the allocation, but he didn’t say how many hedge fund managers the company would stick with or provide details on the planned amount of exits.

“We had a very negative experience in hedge funds,” Hancock said in the presentation. Shifting the allocations will “lead to a much better return on risk and especially return on capital.”

The company has investments in 100 funds. They’re selling in order to preparing for increased volatility and want to reduce “risk assets” in financial markets, as a period of limited liquidity might be around the bend.

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10 comments

  1. matt_bear

    i’ll never invest in a hedge fund again. 75% of investment went up in smoke in 6 months. I was better off dumping it into the GARP index, or equally spreading to a half dozen OA picks.

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    • the dude

      Hedge funds are absurd. They can pursue pretty much any ill advised strategy without significant personal consequences. After collecting 2 and 20 for years, when the fund blows up, often because of “pennies in front of a moving steamroller” strategies, they can liquidate the fund, pass the losses to the investors, and retire. Or start another fund.

      The 2 and 20 is the first clue something is wrong.

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  2. the dude

    Hilarious. “Shifting the allocations will ‘lead to a much better… return on capital.” That should have been apparent some years ago.

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  3. hftongue

    Oil is tanking hard. Probably by $20 at the end of Feb.

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  4. frog

    Gosh, it sure was smart of us taxpayers to bail out AIG, wasn’t it?

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  5. blahblahblah

    markets in turmoil can’t have a proper pending st. valentine’s day massacre since it’s on a Sunday this year

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  6. blahblahblah

    DAX at support again. That’s all. I’m outta here.

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