Citibank 2010 Annual Report Download - page 199

197
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, 2009
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, 2010
Equity securities
U.S. equity $ 1 $ (1) $ — $ — $ — $ —
Non-U.S. equity 1 (1) — — — —
Debt securities
U.S. corporate bonds 1 — — 3 1 5
Non-U.S corporate bonds — — — 1 — 1
Hedge funds 1,235 (15) 85 (220) (71) 1,014
Annuity contracts 215 (44) 55 (39) — 187
Private equity 2,539 148 292 (59) — 2,920
Other investments 148 (66) (66) (16) 4 4
Total assets $4,140 $ 21 $366 $(330) $(66) $4,131
In millions of dollars Non-U.S. pension and postretirement benefit plans
Asset categories
Beginning Level 3
market value at
Dec. 31, 2009
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, 2010
Equity securities
Non-U.S. equity $ 2 $— $ 1 $— $ — $ 3
Debt securities
Non-U.S. corporate bonds 91 — — 16 — 107
Hedge funds 14 — — — — 14
Annuity contracts 187 (5) (1) — — 181
Other investments 18 — 4 — (14) 8
Total assets $312 $ (5) $ 4 $ 16 $(14) $313
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. 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 •฀ investment 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.