U.S. AIG has produced a flurry of headlines so far this week -- and it's only Wednesday.
On Tuesday, the financial services giant grabbed the spotlight with two landmark agreements, one with Vladimir Potanin's Interros holding and one with State Construction Committee, or Gosstroi. One day earlier, its chairman enjoyed a private chat with President Vladimir Putin.
The Tuesday announcement that American International Group, the world's 11th-largest company, would join forces with Interros to launch two new investment funds with more than $500 million in total capital made waves in Moscow -- in part for its sheer target size and in part because, for Interros, it represents a breed of deal not seen since before the 1998 financial crisis.
Both funds, one in real estate and the other in private equity, are to be launched by the end of the year.
New York-based AIG on Tuesday also announced that it had signed a cooperation agreement with Gosstroi to advise it on mortgage market development, risk management and housing-related insurance products.
Mortgages were also on the agenda Monday when Maurice Greenberg met with Putin to discuss boosting economic ties between the United States and Russia as part of the lead-up to Putin's summit with U.S. President George W. Bush at Camp David in September.
"AIG has had a presence in Russia for several years," Greenberg said in a statement Tuesday. "We believe the present environment is a favorable one for furthering our business relationships in the region."
Going into his meeting with Putin, Greenberg had noted that AIG and affiliated companies had invested some $300 million in Russia in recent years.
For Interros, the deal with AIG ranks as its first major deal with a Western company since the 1998 crash. Among pre-1998 transactions, the deal is comparable in size to Interros' sale to BP of a 10 percent stake in oil company Sidanco.
Interros on Tuesday echoed Greenberg's upbeat remarks, billing the funds' launch as proof of the two companies' faith in the business climate here.
"This is an important sign as it shows growing investor confidence in the Russian market," Interros deputy director Andrei Bugrov said. "In 1997 we mostly had portfolio investors, whereas now we see foreign direct investments."
AIG agreed, saying the deal indicates a shift in Russian managers' approach to asset management over the past decade.
"In the past, Russian companies tried to build financial-industrial groups. Now we see them trying to manage assets the way it is done in the West," said Ivan Rodionov, executive director with AIG Brunswick Capital Management, a company that manages several investment funds in Russia. "There is a trend toward separating ownership from management and investment decisions."
The private equity fund will have $300 million at its disposal to invest throughout the former Soviet Union. The real estate fund is expected to total between $200 million and $250 million.
Initially, AIG and Interros each will sink $50 million into the private equity fund, according to an Interros statement issued Tuesday. No figures were given for the real estate fund.
Rodionov was confident that fundraising would not be a problem. Instead, the chief task will be sorting through "the complexity of projects on Russian soil," he said.
The funds' structure follows a typical private equity model: AIG and Interros will act both as general partners, who put up initial capital, and as limited partners, or outside investors in the funds.
Interros will bring to the table its expertise in business acquisition, restructuring and exit strategies, Bugrov said. For its part, AIG will contribute its management expertise and access to capital markets.
Rodionov said AIG and Interros are likely to run the private equity fund on an equal footing, as they look to purchase fixed assets, develop marketing arms within existing firms and acquire other businesses.
"Brand development could be one of the areas of activity," he said. "Fixed assets carry the same price tag all across the globe, but brand development in Russia is seven to eight times cheaper than in Europe."
Both funds will work under the same scheme: Managers will select projects and present them to the investors' committee, whose approval will trigger a call for the required amount of capital.
"We are talking about commitments here, not cash provided by AIG under a deal with Interros," Rodionov said.
AIG's presence here dates back to the former Soviet Union, when the company got involved in several large-scale insurance projects.
In 1994, it launched AIG Russia and AIG Life insurance companies as well as the Russian-American Investment Bank. In 1996, it set up a 10-year AIG Brunswick Millennium Fund with some $300 million under management.
Since the crisis, AIG two years ago launched the $100 million AIG Russia Growth Fund, which it manages together with the Menatep/Yukos group.
AIG also runs a non-country specific Global Emerging Markets Fund, which includes investments in Russia.
AIG may have joined forces officially with Interros this week, but that does not mean it is no longer on the lookout for other Russian partners. The financial services giant is talking to "several other groups," Rodionov said.
AIG has a market capitalization of $130 billion, giving it the 11th spot last year on the Financial Times' ranking of the top 500 global firms.
On Tuesday, the financial services giant grabbed the spotlight with two landmark agreements, one with Vladimir Potanin's Interros holding and one with State Construction Committee, or Gosstroi. One day earlier, its chairman enjoyed a private chat with President Vladimir Putin.
The Tuesday announcement that American International Group, the world's 11th-largest company, would join forces with Interros to launch two new investment funds with more than $500 million in total capital made waves in Moscow -- in part for its sheer target size and in part because, for Interros, it represents a breed of deal not seen since before the 1998 financial crisis.
Both funds, one in real estate and the other in private equity, are to be launched by the end of the year.
New York-based AIG on Tuesday also announced that it had signed a cooperation agreement with Gosstroi to advise it on mortgage market development, risk management and housing-related insurance products.
Mortgages were also on the agenda Monday when Maurice Greenberg met with Putin to discuss boosting economic ties between the United States and Russia as part of the lead-up to Putin's summit with U.S. President George W. Bush at Camp David in September.
"AIG has had a presence in Russia for several years," Greenberg said in a statement Tuesday. "We believe the present environment is a favorable one for furthering our business relationships in the region."
Going into his meeting with Putin, Greenberg had noted that AIG and affiliated companies had invested some $300 million in Russia in recent years.
For Interros, the deal with AIG ranks as its first major deal with a Western company since the 1998 crash. Among pre-1998 transactions, the deal is comparable in size to Interros' sale to BP of a 10 percent stake in oil company Sidanco.
Interros on Tuesday echoed Greenberg's upbeat remarks, billing the funds' launch as proof of the two companies' faith in the business climate here.
"This is an important sign as it shows growing investor confidence in the Russian market," Interros deputy director Andrei Bugrov said. "In 1997 we mostly had portfolio investors, whereas now we see foreign direct investments."
AIG agreed, saying the deal indicates a shift in Russian managers' approach to asset management over the past decade.
"In the past, Russian companies tried to build financial-industrial groups. Now we see them trying to manage assets the way it is done in the West," said Ivan Rodionov, executive director with AIG Brunswick Capital Management, a company that manages several investment funds in Russia. "There is a trend toward separating ownership from management and investment decisions."
The private equity fund will have $300 million at its disposal to invest throughout the former Soviet Union. The real estate fund is expected to total between $200 million and $250 million.
Initially, AIG and Interros each will sink $50 million into the private equity fund, according to an Interros statement issued Tuesday. No figures were given for the real estate fund.
Rodionov was confident that fundraising would not be a problem. Instead, the chief task will be sorting through "the complexity of projects on Russian soil," he said.
The funds' structure follows a typical private equity model: AIG and Interros will act both as general partners, who put up initial capital, and as limited partners, or outside investors in the funds.
Interros will bring to the table its expertise in business acquisition, restructuring and exit strategies, Bugrov said. For its part, AIG will contribute its management expertise and access to capital markets.
Rodionov said AIG and Interros are likely to run the private equity fund on an equal footing, as they look to purchase fixed assets, develop marketing arms within existing firms and acquire other businesses.
"Brand development could be one of the areas of activity," he said. "Fixed assets carry the same price tag all across the globe, but brand development in Russia is seven to eight times cheaper than in Europe."
Both funds will work under the same scheme: Managers will select projects and present them to the investors' committee, whose approval will trigger a call for the required amount of capital.
"We are talking about commitments here, not cash provided by AIG under a deal with Interros," Rodionov said.
AIG's presence here dates back to the former Soviet Union, when the company got involved in several large-scale insurance projects.
In 1994, it launched AIG Russia and AIG Life insurance companies as well as the Russian-American Investment Bank. In 1996, it set up a 10-year AIG Brunswick Millennium Fund with some $300 million under management.
Since the crisis, AIG two years ago launched the $100 million AIG Russia Growth Fund, which it manages together with the Menatep/Yukos group.
AIG also runs a non-country specific Global Emerging Markets Fund, which includes investments in Russia.
AIG may have joined forces officially with Interros this week, but that does not mean it is no longer on the lookout for other Russian partners. The financial services giant is talking to "several other groups," Rodionov said.
AIG has a market capitalization of $130 billion, giving it the 11th spot last year on the Financial Times' ranking of the top 500 global firms.
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