Equifax 2012 Annual Report Download - page 68

66 Equifax 2012 Annual Report
USRIP, or the Plan, Investment and Asset Allocation Strategies.
The primary goal of the asset allocation strategy of the Plan is to
produce a total investment return which will satisfy future annual cash
benefit payments to participants and minimize future contributions
from the Company. Additionally, this strategy will diversify the plan
assets to minimize nonsystemic risk and provide reasonable assur-
ance that no single security or class of security will have a
disproportionate impact on the Plan. Investment managers are
required to abide by the provisions of ERISA. Standards of
performance for each manager include an expected return versus an
assigned benchmark, a measure of volatility, and a time period of
evaluation.
The asset allocation strategy is determined by our external advisor
forecasting investment returns by asset class and providing allocation
guidelines to maximize returns while minimizing the volatility and cor-
relation of those returns. Investment recommendations are made by
our external advisor, working in conjunction with our in-house Invest-
ment Officer. The asset allocation and ranges are approved by
in-house Plan Administrators, who are Named Fiduciaries under
ERISA.
The Plan, in an effort to meet asset allocation objectives, utilizes a
variety of asset classes which has historically produced returns which
are relatively uncorrelated to those of the S&P 500 in most environ-
ments. Asset classes included in this category of alternative assets
include hedge funds, private equity (including secondary private
equity) and real assets (real estate, funds of hard asset securities and
private equity funds focused on real assets). The primary benefits of
using these types of asset classes are: (1) their non-correlated returns
reduce the overall volatility of the Plan’s portfolio of assets, and
(2) their ability to produce superior risk-adjusted returns. This has
allowed the Plan’s average annual investment return to exceed the
S&P 500 index return over the last ten years. Additionally, the Plan
allows certain of their managers, subject to specific risk constraints,
to utilize derivative instruments, in order to enhance asset return,
reduce volatility or both. Derivatives are primarily employed by the
Plans in their fixed income portfolios and in the hedge fund-of-funds
area. Derivatives can be used for hedging purposes to reduce risk.
The Plan is prohibited from investing additional amounts in Equifax
stock once the market value of stock held by each plan exceeds
10% of the total market value of each plan. In 2011, all shares of
Equifax common stock directly owned by the USRIP were sold and
none were directly owned by the Plan at December 31, 2012. At
December 31, 2010, the USRIP’s assets included 0.4 million shares
of Equifax common stock, with a market value of $13.7 million. Not
more than 5% of the portfolio (at cost) shall be invested in the
securities of any one issuer, with the exceptions of Equifax common
stock or other securities, and U.S. Treasury and government agency
securities.
The following asset allocation ranges and actual allocations were in
effect as of December 31, 2012 and 2011:
Actual
USRIP Range 2012 2011
Large-Cap Equity 10% − 35% 19.1% 13.9%
Small- and Mid-Cap Equity 0% − 15% 4.0% 1.3%
International Equity 10% − 30% 16.7% 10.7%
Private Equity 2% − 10% 7.3% 6.2%
Hedge Funds 10% − 30% 18.0% 17.3%
Real Assets 2% − 10% 5.9% 5.2%
Fixed Income 15% − 40% 27.5% 34.8%
Cash 0% − 15% 1.5% 10.6%
CRIP Investment and Asset Allocation Strategies. The primary
goal of the asset allocation strategy of the Plan is to produce a total
investment return which will satisfy future annual cash benefit pay-
ments to participants and minimize future contributions from the
Company. Additionally, this strategy will diversify the plan assets to
minimize nonsystemic risk and provide reasonable assurance that no
single security or class of security will have a disproportionate impact
on the Plan. Due to the high funded status of the Plan, the Pension
Committee of the CRIP has adopted a conservative asset allocation
of 50/50 in equities and fixed income. The Pension Committee
maintains an investment policy for the CRIP, which imposes certain
limitations and restrictions regarding allowable types of investments.
The current investment policy imposes those restrictions on invest-
ments or transactions such as (1) Equifax common stock or
securities, except as might be incidental to any pooled funds which
the plan may have, (2) commodities or loans, (3) short sales and the
use of margin accounts, (4) put and call options, (5) private place-
ments, and (6) transactions which are ‘‘related-party’’ in nature as
specified by the Canadian Pension Benefits Standards Act and its
regulations.
The following specifies the asset allocation ranges and actual alloca-
tion as of December 31, 2012 and 2011:
Actual
CRIP Range 2012 2011
Canadian Equities 25% − 50% 35.6% 34.8%
U.S. Equities 0% − 19% 0.0% 5.2%
International Equities 0% − 19% 14.1% 8.9%
Fixed Income 30% − 70% 49.9% 50.5%
Money Market 0% − 10% 0.4% 0.6%
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued