Pinebridge buys AIG’s India mutual fund business

American International Group (AIG) has entered into a purchase-sale agreement with Pinebridge Investments, a global asset management company, for the sale of its Indian mutual fund business.

The mutual fund would be taken over after regulatory approvals, according to two people familiar with the matter.

The agreement to sell AIG’s Indian mutual fund business to Pinebridge was finally entered into in the last week of October, though it was not made public at the time.

Details on the valuation could not be ascertained, but sources said since the deal is part of an announced global sale, it is unlikely to have been negotiated separately.

Sunil Mehta, the country head and chief executive officer of AIG India, declined to comment.

A purchase-sale agreement is a document that announces the intention of a buyer and seller to enter into a transaction.

At the peak of the financial crises in late 2008, AIG sold a number of its subsidiaries. Among them was its global asset management business, which was renamed Pinebridge Investments, a name that is said to have been partly derived from the address of the global headquarters of AIG at 70, Pine Street, New York.

Pacific Century Group (PCG), a private investment firm owned by Richard Li, the son of Hong Kong tycoon and chairman of Hutchison Whampoa Li Ka-shing, bought Pinebridge from AIG in March this year.

Under the then agreement, Pinebridge took over AIG’s asset management business under the Pinebridge brand in over 30 countries.

Regulatory issues associated with the structure of AIG’s India business is said to have resulted in the decision to sell the India business separately and at a later point of time.

Currently, Pinebridge companies provide investment advice and market asset management products and services. It has $83 billion(around `3.8 lakh crore) in assets under management as of September 2010 and is present in 32 countries.

Its emerging markets portfolio is worth $12.4 billion(around `57,000 crore) and in addition it also manages $4.2 billion (around `19,000 crore) through its hedge fund solutions business.
Pinebridge, which was founded in 1993, is an Asia-based private investment group with interests in infrastructure, property and other investments mainly in the Asia-Pacific region.

AIG Investments had `1,020 crore of assets under management as of September 2010, the latest available data.

The company, which employs around 60 people, has nearly 40% of its portfolio in equities.

This is a higher allocation than the rest of the industry, which manages assets worth `6.57 lakh crore of which 32% consists of equity assets.

Equity assets are considered to be more profitable than debt assets, according to industry experts.

In recent stake sales by asset management companies, valuations have been in low single digits as a percentage of assets under management.

According to media reports, DBS Cholamandalam was acquired by L&T Finance for Rs45 crore in September 2009 at 1.5% of its nearly Rs3,000 crore in assets under management at the time.
LIC mutual fund entered into an agreement to sell 35% of its stake to Nomura Asset Management Company of Japan in July 2009 valuing the mutual fund at Rs880 crore or 2.7% of its assets under management at the time.