Citibank 2009 Annual Report Download - page 172

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Level 3 Roll Forward
The reconciliations of the beginning and ending balances during the period for Level 3 assets are as follows:
In millions of dollars U.S. pension and postretirement benefit plans
Asset categories
Beginning Level 3
market value at
Dec. 31, 2008
Realized
gains
(losses)
Unrealized
gains
(losses)
Purchases,
sales,
issuances
Transfers in
and/or out of
Level 3
Ending Level 3
market value at
Dec. 31, 2009
Equity securities
U.S. equity $ — $ — $ — $ 1 $ — $ 1
Non-U.S. equity — — — 1 — 1
Mutual funds 2 — — — (2) —
Debt securities
U.S. corporate bonds 1 — 1 (1) — 1
Hedge funds 1,390 (2) 109 (168) (94) 1,235
Annuity contracts 277 60 (61) (61) — 215
Private equity 2,877 (14) (504) 180 — 2,539
Other investments 170 12 (4) (30) — 148
Total assets $4,717 $ 56 $(459 ) $ (78) $(96) $ 4,140
In millions of dollars Non-U.S. pension and postretirement benefit plans
Asset categories
Beginning Level 3
market value at
Dec. 31, 2008
Realized
gains
(losses)
Unrealized
gains
(losses)
Purchases,
sales,
issuances
Transfers in
and/or out of
Level 3
Ending Level 3
market value at
Dec. 31, 2009
Debt securities
Non-U.S. corporate bonds $— $— $— $87 $— $ 87
Hedge funds 14 — (1) — — 13
Real estate 13 — 1 — — 14
Total assets $27 $— $— $87 $— $114
Investment Strategy
Citigroup’s global pension and postretirement funds’ investment strategies
are to invest in a prudent manner for the exclusive purpose of providing
benefits to participants. The investment strategies are targeted to produce a
total return that, when combined with Citigroup’s contributions to the funds,
will maintain the funds’ ability to meet all required benefit obligations.
Risk is controlled through diversification of asset types and investments
in domestic and international equities, fixed-income securities and cash.
The target asset allocation in most locations outside the U.S. is to have the
majority of the assets in either equity or debt securities. These allocations
may vary by geographic region and country depending on the nature of
applicable obligations and various other regional considerations. The
wide variation in the actual range of plan asset allocations for the funded
non-U.S. plans is a result of differing local statutory requirements and
economic conditions. For example, in certain countries local law requires
that all pension plan assets must be invested in fixed-income investments,
government funds, or local-country securities.
Significant Concentrations of Risk in Plan Assets
The assets of Citigroup’s pension plans are diversified to limit the impact
of any individual investment. The U.S. pension plan is diversified across
multiple asset classes, with publicly traded fixed income, hedge funds and
private equity representing the most significant asset allocations. Investments
in these three asset classes are further diversified across funds, managers,
strategies, vintages, sectors and geographies, depending on the specific
characteristics of each asset class. The pension assets for Citigroup’s largest
non-U.S. plans are primarily invested in publicly-traded fixed income and
publicly-traded equity securities.
Risk management practices
Risk management oversight for Citigroup’s U.S. pension plans and largest
non-U.S. pension plans is performed by Citigroup’s Independent Risk
Management Regional Units. The risk oversight function covers market risk,
credit risk and operational risk. Although the specific components of risk
oversight are tailored to the requirements of each region and of each country,
the following risk management elements are common to all regions:
Periodic asset liability management and strategic asset allocation studies•฀
Monitoring of funding levels and funding ratios•฀
Monitoring compliance with asset allocation guidelines•฀
Monitoring asset class performance against asset class benchmarks•฀
Monitoring investor manager performance against benchmarks•฀
Quarterly risk capital measurement •฀
Risk management for the remaining non-U.S. pension assets and liabilities is
performed by Citigroup’s local country management.