plans toconsiderably downsize its hedge fund portfolio, according to a companyexecutive who spoke with analysts on a conference call to discuss the company'sfirst-quarter earnings.
The companyexpects to reduce the portfolio by another two-thirds from where it standscurrently, said Steven Goulart, MetLife's chief investment officer andexecutive vice president, on a May 5 earnings call.
Theportfolio is now "just over" $1.8 billion, after already undergoingan about $600 million reduction in 2015, he said. The company expects to redeemabout another $1.2 billion.
Goulartsaid it will likely take a couple of years to accomplish the redemptions, withperhaps 60% of redemptions done in 2016, and about 40% in 2017, with perhaps alittle of this activity spilling into 2018. He reminded analysts that thishedge fund portfolio represents "a very small portion" of thecompany's investment portfolio.
Thecompany will continue to keep a small portfolio of its most consistentlyperforming managers and hedge funds, Goulart said.
MetLife'svariable investment income declined considerably in the first quarter of 2016compared with the first quarter of 2015 due to weak hedge fund performance, thecompany stated May 4 in a pressrelease.
"Certainly,the first quarter was challenging for variable investment income" becauseof hedge fund returns, which were negative for the quarter, he said. "Ifwe look at the market environment that exists today, … I think it'll continueto be challenging for hedge funds," Goulart said.