A number of banks and private clients told WealthBriefing they were concerned about investments in the AIG Enhanced Fund, which is managed by AIG Life UK, the UK-registered arm of the company that has been rescued from possible meltdown by the US government.

It is understood that a number of banks, including UK private bank Coutts, have been in discussion with AIG in the UK about its products and proposals to shift money into a new vehicle.

On 15 September, on the eve of the US bailout deal for AIG, the firm said it had suspended withdrawals from its Enhanced Fund and will formally close the fund on 15 December this year. The fund has also been shut to new business.

As part of the wind-down process, clients can redeem half of their fund assets and transfer these to the AIG Standard Fund, an instant-access product. The remaining 50 per cent of fund assets can either be redeemed, based on the asset values at the 15 December closure date - incurring a potential severe loss - or the money will be switched into a proposed new Protected Recovery Fund. AIG says that if clients stay in the Protected Recovery Fund until 1 July 2012, they will get back at least the initial value of their assets.

AIG said it intends to give clients further details about the options in early October.

The actions by AIG come at a time when products sold by institutions to private banks have been thrown into doubt because of the financial market chaos. Wealth managers fear that some structured products underwritten by Lehman Brothers, which has filed for bankruptcy, are either worthless or have lost a substantial amount of their value.

No other funds operated by AIG Life UK are affected by the company’s action.