Former AIG Investments Coming To A Fundraising Market Near You

More than a year after its spin-off from AIG, the insurance giant’s investment management unit is nearing the close of its sale to Pacific Century Group, an Asia-based private investment group. Barring any issues winning regulatory approval in 32 countries and LP and client consent, the firm, called PineBridge Investments, hopes to close the deal at month’s end in January or February, CEO Win Neuger said. The firm has told me the name reflects “the company’s rich heritage and roots on Pine Street in New York’s financial district.”*

At that point, the firm’s private equity business will finally to hop back from the sidelines. “We went for a year when not many people wanted to talk to us,” said Neuger. But the AIG stigma has finally lifted. “The number of meetings and calls from people wanting to do business with us is back to historic levels,” he said.

It’s a story not unlike one I heard in the offices of Neuberger Berman, the investment management arm of Lehman Brothers which underwent a management buyout last year. The difference being Pinebridge continues to do significant business with AIG and plans to continue the relationship. One third of capital managed by Pinebridge, or $29.4 billion, comes from AIG.

While Pinebridge’s secondary fund business has been somewhat active in the past year, its other businesses, such as funds of funds, have been sidelined by a lack of investment capital and the inability to raise it.

Without commenting directly on any fundraising activity, managing director Steven Costabile said the firm has completed the necessary preparations to return to market. One area the firm is particularly excited about is credit. Costabile said he expects high yield will only have the capacity to refinance around half of the $1 trillion in PE-related loans that will mature in the coming years. He sees great opportunity in the remaining $500 billion, which will need to use mezzanine and bank loans to refinance. And in the interim, there is a great demand for credit, Costabile said.

Regarding the firm’s traditional buyout funds and private equity funds-of-funds, Costabile said the firm will “be in front of” the movement toward LP-friendly trends. Those include better governance, “more understandable” clawbacks, and fees that are aligned with performance. “If you look at what ILPA was asking for all the way back in 1993, it’s not much different than what they’re seeking today,” Costabile said. The difference is that in 1993, investors never got much traction, but now they are. Further, from a fund-of-funds perspective, it’s difficult to ask for those terms as an LP and not deliver them as a GP, CEO Neuger said.

Even though the firm has experienced a few personnel changes–In December 2008 the firm laid off head of European Alternative Investments business, Ion Bogdaneris,and Raj Ranawat, a managing director in the direct investments group in London, no departures have triggered a key man provision except for one fund in Brazil, Costabile said.

*That’s updated from my previous speculation that the name had something to do with AIG Pinestar. It doesn’t.