WILTON, Conn.--(BUSINESS WIRE)--New academic research sponsored by AIG Financial Products Corp. (AIG-FP), a member company of the American International Group, Inc. (AIG), and conducted by Professor Gary Gorton of the Wharton School of the University of Pennsylvania, Professor Fumio Hayashi of the University of Tokyo, and Professor K. Geert Rouwenhorst of the Yale School of Management(1), reveals that the risk premium for commodities depends on the level of inventories and that when inventories are low, the risk premium tends to increase appreciably.

The study, entitled "The Fundamentals of Commodity Future Returns," examines trends in the commodities futures risk premium by examining data from 31 commodity futures and physical inventories between 1969 and 2006. The paper also outlines dynamic trading strategies designed to utilize the results of the research that can potentially take advantage of the higher risk premia displayed by commodities experiencing low inventory levels. The full text of the new Gorton-Hayashi-Rouwenhorst paper is available at http://ssrn.com/abstract=996930 or though AIG-FP.

"Amid increased interest in commodities, investors are hungry for academically rigorous analysis of this asset class," said Joseph Cassano, President of AIG-FP. "There is also considerable interest in enhanced strategies that try to take advantage of commodity fundamentals and historical trading patterns. Our colleagues' new study makes important contributions in both realms."

"Facts and Fantasies About Commodity Futures" (2006), an earlier Gorton-Rouwenhorst academic study sponsored by AIG-FP, is widely regarded as the definitive examination of the long-term performance of commodities as an asset class. This earlier study showed that investing in long-only indices of commodity futures has historically generated equity-like returns but with lower risk. In examining the properties of commodity futures from 1959 to 2004, the paper also showed that commodities had low correlation with equity and bond returns. The research demonstrated that these possible diversification benefits are attuned to the business cycle and that commodities have retained their diversification benefits even when equity and bond returns were under greatest stress.

AIG-FP is the creator of the Dow Jones - AIG Commodity Index(SM) (DJ-AIGCI(SM)), a leading commodity benchmark. The Dow Jones-AIG Commodity Index is composed of 19 futures contracts on physical commodities and was introduced in 1998. As of the end of June 2007, there is an estimated $38 billion invested in financial products that track the Dow Jones-AIG Commodity Index on a global basis.

Additional information on commodity index solutions and strategies can be obtained by contacting the AIG-FP commodities team at 203-222-4710 or commodities@aigfpc.com.

About AIG Financial Products Corp.

AIG Financial Products Corp. (AIG-FP) is a wholly owned subsidiary of American International Group, Inc., world leaders in insurance and financial services. Founded in 1987, AIG-FP was one of the first companies focused principally on the derivatives markets in the United States. AIG-FP is active in a full spectrum of OTC derivative and structured products markets, including commodities, credit, energy, equities, foreign exchange, and rates. As leading participants in the capital and derivatives markets, AIG-FP provides clients with corporate finance, investment, and financial risk management solutions. AIG-FP also acts as a principal investor in the energy and infrastructure sectors. AIG-FP's clients include many of the world's top corporations, investment managers, pension funds, banks, investment banks, sovereigns, hedge funds, foundations and endowments, as well as select high-net-worth individuals. With group offices in London, Paris, Tokyo, Hong Kong, and Wilton, Connecticut, AIG-FP has extensive global reach. For additional information please refer to http://www.aigfp.com.

About American International Group, Inc.

American International Group, Inc. (AIG), world leaders in insurance and financial services, is the leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional, and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services, and asset management around the world. AIG's common stock is listed in the U.S. on the New York Stock Exchange as well as the stock exchanges in London, Paris, Switzerland, and Tokyo.

Disclaimer Note: This announcement is for information purposes only and does not constitute an offer to sell or invitation to purchase any securities.

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Source: AIG Financial Products Corp.