MetLife Inc., the largest U.S.life insurer, said it’s seeking to exit most of its hedge-fundportfolio after a slump in the investments.

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The insurer is seeking to redeem $1.2 billion of the $1.8billion in holdings, a process that may take a couple of years tocomplete, Chief Investment Officer Steven Goulart said Thursday ina conference call discussing first-quarter results at the NewYork-based company. The portfolio, which posted negative returns inthe quarter, was cut by about $600 million in 2015, he said.

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“It’s had up-and-down years and really it’s just tooinconsistent, we think, in actual performance,” Goulart said. “Whatwe’ll be left with is a small portfolio of really our mostconsistently performing managers in hedge funds.”

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Read: MetLife to pay for misleading investors on variableannuity replacements

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MetLife, which has an investment portfolio of morethan $520 billion, has been looking in recent yearsfor alternatives to bonds because interest rates are so low. Whileresults from private equity have been satisfactory, hedge fundshave been more volatile, Goulart said.

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Chief Executive Officer Steve Kandarian is seeking to increasethe portion of earnings that can be returned to shareholders. Thatfocus on free cash flow factored into the decision to cut thehedge-fund investments, Goulart said.

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Competitor American International Group Inc. is also shiftingallocations after posting three straight unprofitable quarters. Thecompany said Tuesday that it has submitted notices of redemption for $4.1billion of hedge-fund holdings through March 31. Average investedassets in hedge funds at AIG were $10.1 billion for the firstquarter.

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Private equity

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MetLife reported profit Wednesday that missedanalysts’ estimates. Investment income fell 17 percent to $4.56billion, hurt by both hedge funds and low bond yields. Kandariansaid Thursday that the insurer will continue to hold someinvestments beyond bonds.

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“Some earnings variability is an acceptable risk, as these assetclasses have provided strong returns to MetLife shareholders overtime,” Kandarian said. Variable investment income, which includeshedge funds and private equity, “was better than planned in 7 ofthe past 10 years.”

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MetLife dropped 1.6 percent to$43.22 at 9:32 a.m. in New York trading. That extended its declinefor the year to 10 percent.

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