AIG 2013 Annual Report Download - page 263

The significant unobservable inputs used for Derivatives liabilities — credit contracts are recovery rates, diversity
scores, and the weighted average life of the portfolio. AIG non-performance risk is also considered in the
measurement of the liability.
An increase in recovery rates and diversity score will decrease the fair value of the liability. An increase in the
weighted average life will increase the fair value measurement of the liability.
The following table includes information related to our investments in certain other invested assets,
including private equity funds, hedge funds and other alternative investments that calculate net asset value
per share (or its equivalent). For these investments, which are measured at fair value on a recurring basis,
we use the net asset value per share as a practical expedient to measure fair value.
Investment Category
Private equity funds:
Leveraged buyout Debt and/or equity investments made as part of a $ 2,529 $ 669
transaction in which assets of mature companies
are acquired from the current shareholders, typically
with the use of financial leverage
Real Estate / Investments in real estate properties and 251 52
Infrastructure infrastructure positions, including power plants and
other energy generating facilities
Venture capital Early-stage, high-potential, growth companies 157 16
expected to generate a return through an eventual
realization event, such as an initial public offering or
sale of the company
Distressed Securities of companies that are in default, under 184 36
bankruptcy protection, or troubled
Other Includes multi-strategy and mezzanine strategies 112 100
Total private equity funds 3,233 873
Hedge funds:
Event-driven Securities of companies undergoing material 788 2
structural changes, including mergers, acquisitions
and other reorganizations
Long-short Securities that the manager believes are 1,318 –
undervalued, with corresponding short positions to
hedge market risk
Macro Investments that take long and short positions in 320 –
financial instruments based on a top-down view of
certain economic and capital market conditions
Distressed Securities of companies that are in default, under 316 –
bankruptcy protection or troubled
Emerging markets Investments in the financial markets of developing – –
countries
Other Includes multi-strategy and relative value strategies 66 –
Total hedge funds 2,808 2
Total $ 6,041 $ 875
Private equity fund investments included above are not redeemable, as distributions from the funds will be received
when underlying investments of the funds are liquidated. Private equity funds are generally expected to have 10-year
lives at their inception, but these lives may be extended at the fund manager’s discretion, typically in one or two-year
Derivative liabilities — credit contracts
Investments in Certain Entities Carried at Fair Value Using Net Asset Value per Share
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AIG 2013 Form 10-K 245
ITEM 8 / NOTE 5. FAIR VALUE MEASUREMENTS
December 31, 2013 December 31, 2012
Fair Value Fair Value
Using Net Using Net
Asset Value Asset Value
Per Share (or Unfunded Per Share (or Unfunded
(in millions) Investment Category Includes its equivalent) Commitments its equivalent) Commitments
$ 2,544 $ 578
346 86
140 13
183 34
134 238
3,347 949
976 2
1,759 11
612 –
594 15
287 –
157 –
4,385 28
$ 7,732 $ 977
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