Private banks, whose clients may have lost out from AIG fund investments, are urging concerned investors to talk to them first as a group of investors gear up to launch a class action suit to press for action to recover money. 

High net worth individuals have invested $8.8 billion in AIG’s Enhanced fund, the majority of which was put into corporate bonds that have now plummeted in value as a result of the credit crunch. Insurance giant AIG suspended withdrawals from its Enhanced fund in September, just prior to its nationalisation by the US government. Days later, it announced that the fund would close to new business in December.

As a result, an action group of investors in AIG’s Enhanced Fund has been set up. Law firms are already jostling for the chance to represent the group in any litigation. A website has also been set up for those affected by the fund’s closure, which now has a membership of over 200 disgruntled investors.  The action group, which has gained national press coverage, is also holding meetings to decide on future courses of action.

A spokeswoman for Barclays Wealth, one of the firms with clients who were exposed to the AIG fund, said:  “We are aware of this action group and its website. We appreciate that many AIG PAB holders are concerned about the situation in the EVRF and they want to consult with other investors and to be able to express views as a group directly to AIG.

“We are willing to liaise with this action group if we consider that this will benefit our clients in relation to this issue. However, we also continue to represent our clients’ interests in our dealings with AIG and we would encourage Barclays Wealth clients to continue to deal with, and raise concerns to, their private banker,” the spokeswoman said.

Confirming that a small number of its investors were affected, a spokesperson for UK wealth management firm St James’s Place said: “We are working closely with AIG, and will keep clients up to date as matters progress.”

UBS, one of the banks named on the group's website, did not immediately comment when contacted by WealthBriefing.

Investors have been told that they could get back a minimum of half their money now, but would have to wait three years if they wanted to reclaim the remainder without loss.  Those cashing in their entire investment in December stand to lose as much as 25 per cent.

AIG has pushed back the deadline for investors to decide when they will cash out their investments to 25 November, according to posts on www.aigvictims.com.  Investors also say that AIG has appointed Cairn Capital, the London-based wealth manager, to provide them with an independent commentary to assist their decision.  Of the banks invited to a meeting of the AIG action group this week, Barclays Wealth was the only one to have sent representatives, bloggers reported.  Clients of Barclays Wealth are also expecting to receive a letter from the bank this weekend, which will contain advice and information on their investments in the now defunct AIG fund.

Meanwhile, the AIG saga has taken another twist with the news that Prudential, the UK insurer, may be looking to buy parts of AIG beyond its stricken US rival’s Asian operations, according to the Financial Times.

“I think you would expect us to look at the assets in AIG as they go through their disposal process,” Mark Tucker, chief executive, was quoted as saying. “I think we are at a very early stage and I think we’re considering the opportunities and, over time, we will come back and discuss in greater depth,” Mr Tucker said.

His comments mark a broadening of Prudential's interest in AIG as it had been thought it was only interested in its Asian assets up until now.