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Voya Financial hit by poor hedge fund, private equity returns in Q1

suffered theripple effects of a rough first quarter for hedge funds and private equityfirms, as returns from its alternative investments fell well below expectationsduring the period.

The companysaid May 4 that its alternative investment income came up $56 million short oflong-term targets and contributed to lower earnings across its businesssegments. Voya reported 55 cents per share of operating profits in the firstquarter, a 33% drop from the prior-year period. Its slumping alternativeinvestment performance alone cost 17 cents per share of operating earnings inthe quarter, which executives attributed largely to losses from private equityenergy holdings and at hedge funds.

"Ourinvestment capital results were significantly impacted by a reversal of carriedinterest in one of our private equity funds, resulting in a net loss of $16million," CFO Ewout Steenbergen said on a conference call to discussearnings. "Finally, volatility and underlying hedge fund returns alsoaffected performance."

Thecompany also saw mark-to-market losses from private equity energy holdings andhad a $125 million exposure to the energy industry in its general accountalternatives portfolio as of March 31.

Overall,Voya's alternatives portfolio returned just 2.2% in the first quarter. Itsquarterly return target is 9%.

"Whilewe're disappointed in this quarter's alternative asset performance, it'simportant to note that this portfolio has historically generated strongperformance and represents only 1% of our invested assets," Chairman andCEO Rodney Martin Jr. said.

Severalinsurers have reported lower net investment income due to below-average returnsfrom its alternative holdings, in the wake of market volatility throughout muchof January and February.