95% of AIG cash fund investors move into recovery fund
Nearly all the investors in the troubled AIG enhanced money market fund have switched their holdings to the recovery fund set up to liquidate its assets, rather than take losses on their investments.
An overwhelming 95% of investors in the enhanced fund have decided to transfer their investment, rather than exit, when the fund closes on December 15.
AIG Life said: "Following the extensive communication exercise with policyholders, almost 99% of policyholders returned completed nomination forms ahead of the 25 November deadline.
Policyholders have overwhelmingly recognised the value of the guarantee provided by AIG Life on the Protected Recovery Fund, with the vast majority electing this option."
The insurer said in a press release this morning that it believes the recovery fund, which is due to mature in 2012, represents the best value for policy holders.
The other 5% of investors chose the exit plan, which necessitates the sale of some of the enhanced fund assets.
AIG appointed hedge fund Cairn Capital to auction these assets for the 5% of policyholders choosing this path.
Policyholders who are exiting will receive a price of 73% of their enhanced fund holdings on 14 December, which when added to the 50% cash holding already transferred, means that they will receive nearly 87% of the face value of their total holdings in the enhanced fund.
Considering AIG initially estimated a discount of between 20% and 50% on redemptions, exiting investors are better off than expected.
The AIG enhanced fund, worth £5.8bn at one point, was suspended earlier this year following a string of redemption demands by wealthy individuals worried by problems at AIG, now rescued by the US government. The fund's value has suffered as a result of its exposure to credit instruments which have crashed in value as a result of the credit crisis.
The banks that have confirmed they marketed the AIG enhanced notes to clients include Barclays Wealth, UBS, Coutts, HSBC and Lloyds TSB, all of whom have told Financial News they are working hard to get the best result they can for their clients. A range of other banks and independent advisers also sold clients the note, once widely seen as a safe opportunity to enhance returns prior to recent events.
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