When Win Neuger was hired as chief investment officer of American International Group Inc. in 1995, his mandate was to create a money management arm that would manage assets for outside clients, and not just those of its parent. AIG Global Investment Group was formed in 1996, with Mr. Neuger as chairman and chief executive officer. Total assets under management have grown more than 530%, to $475.84 billion at year-end 2004 from $75.1 billion in 1996. Assets from outside clients stood at $69.5 billion as of Dec. 31, up from about $10 billion in 1996. Mr. Neuger began his career as an equity analyst at a Minnesota bank. Before joining AIG, he had been chief investment officer of Western Asset Management Co., and then was managing director of equity global investment management at Bankers Trust Co. He has an MBA from Dartmouth University's Amos Tuck School of Business. Mr. Neuger talked with Pensions & Investments about the importance of investing alongside clients and how the firm transformed from one that served only its parent to one with a host of outside clients.
Investing partner: Face to Face with Win Neuger
A We liked to joke that we were a $75 billion startup money management company that came under the AIG umbrella.
A When I came here, I was the first person to have the consolidated role as CIO for AIG. Prior to that, our asset management had been decentralized. … One of the key challenges was to pull all of that together into a cohesive asset management group and, ultimately, a cohesive asset management business. (That meant) taking people who had worked on AIG's balance sheet and making that into a group that was focused on asset management and then, taking it out to clients.
A That you have to face the fact that some people can make transitions and others cannot.
A The most important piece was not the nuts and bolts, but the cultural transformation — to shift the whole organization from being internally focused to being externally focused. We didn't have sales and marketing. We didn't have the kind of infrastructure … to be able to service clients in a way they expect. We had to build a client service team. We had to change the kind of portfolio managers we had, to be people who understood what it was like to be focused on clients.
We spent most of the first four years doing that and not really going out in a significant way trying to raise assets (except for specific products like private equity).
A We're investors side by side with clients. We are always a major investor in the asset class … we're bringing to the market. So we sit on the same side of the fence as the clients do. We will not offer products that AIG itself is not a believer in … If we don't believe in it enough to put it on our own balance sheet, we're not going to sell it.
A Alternatives have been for a long time very important to what we have done. We've been an investor in alternatives for more than 20 years. Many of our first client assets were in the alternatives area … We have major positions in private equity (close to $20 billion in 31 funds). We are a very, very significant player in that market, with a range that runs from emerging markets products to infrastucture funds on a worldwide basis to funds of funds to U.S. direct funds to specialty funds. In addition, we have hedge fund of funds products … and real estate products.
A We're a relatively new firm; we only started eight years ago, and our competition has decades of experience. We're here to stay. We may have ebbs and flows, but clients will be increasingly looking at alternative investments because they're diversifying their portfolios.
A The various investigations of AIG have gotten a lot of attention. As a result, we certainly address the issue with all of our clients and prospective clients. We remind them first that none of these has anything to do with our business and the second is that AIG has been very open and cooperative. AIG in aggregate has a very strong compliance culture, and our group has its own compliance culture that goes above and beyond … Our clients have been very comfortable with that.
A To be recognized as a premier global investment management firm. We actually think we are … but clearly we're not at the point that the general market would recognize us as such. It's a driver of our efforts to build strategic relationships with our clients.
There are several components of this, including being strategic partners with our clients — we really do relate to them, investor to investor — and then confronting the issues of asset allocation and how an asset class fits into the overall structure.
A Great investment performance. Our mantra is returns plus relationships equals recognition and success.
A I think investors will be moving to global equity from international equity allocations. If you have a large international drug company in Europe that makes a large acquisition in the U.S., we call that a European company. If a U.S. company acquires a European one, we call it a U.S. company.
Instead, we should think about how an industry relates on a global basis instead of on a local country basis. That will lead to global thinking.
I think it's beginning to already happen, and in five to 10 years it'll be even more prevalent because it'll make more sense to separate investment by cap rather than by geography.
A It would have been public relations or journalism, because that's one of the best jobs to have. My father was a public relations consultant.
A I like to spend time with my three grandchildren.
I also enjoy early 20th century art. My wife is a distant relative of Robert Henri, the American realist.