Aviva Shuts $2bn Fund of Hedge Funds Unit Amid Merger Talks

Aviva has confirmed that it will shut a $2bn unit that is responsible for investing in external hedge funds, in order to streamline operations.

The British insurer added that the closure of the unit is part of a global trend within the industry, where companies are cutting out middlemen by closing shop or merging with others.

"Following a comprehensive review of our business, we have decided to exit the business of investing in third party hedge funds," said an Aviva spokesperson in a statement.

"We are working with our affiliates and the underlying hedge fund managers on an orderly transition plan."

Aviva is currently considering a £5.6bn merger with Friends Life.

The two insurers said on 21 November that they had agreed terms of a likely all-share deal.

Aviva's bid implied a 15% premium to Friends Life's share value as of its closing price on 21 November.

Under the terms of the offer, Friends Life shareholders will own 26% of the combined group. They will also receive an amount in cash equal to any Friends Life final dividend for the 2014 financial year.