KeyBank 2014 Annual Report Download - page 208

The investment objectives of the pension funds are developed to reflect the characteristics of the plans, such as
pension formulas, cash lump sum distribution features, and the liability profiles of the plans’ participants. An
executive oversight committee reviews the plans’ investment performance at least quarterly, and compares
performance against appropriate market indices. The pension funds’ investment objectives are to balance total
return objectives with a continued management of plan liabilities, and to minimize the mismatch between assets
and liabilities. These objectives are being implemented through liability driven investing and the adoption of a
de-risking glide path. The following table shows the asset target allocations prescribed by the pension funds’
investment policies based on the plan’s funded status at December 31, 2014.
Asset Class
Target
Allocation
2014
Equity securities:
U.S. 20 %
International 16
Fixed income securities 40
Convertible securities 5
Real assets 13
Other assets 6
Total 100 %
Equity securities include common stocks of domestic and foreign companies, as well as foreign company stocks
traded as American Depositary Shares on U.S. stock exchanges. Debt securities include investments in domestic-
and foreign-issued corporate bonds, U.S. government and agency bonds, international government bonds, and
mutual funds. Convertible securities include investments in convertible bonds. Real assets include an investment
in a diversified real asset strategy separate account designed to provide exposure to the three core real assets:
Treasury Inflation-Protected Securities, commodities, and real estate. Other assets include investments in a multi-
strategy investment fund and a limited partnership.
Although the pension funds’ investment policies conditionally permit the use of derivative contracts, we have not
entered into any such contracts, and we do not expect to employ such contracts in the future.
The valuation methodologies used to measure the fair value of pension plan assets vary depending on the type of
asset, as described below. For an explanation of the fair value hierarchy, see Note 1 (“Summary of Significant
Accounting Policies”) under the heading “Fair Value Measurements.”
Equity securities. Equity securities traded on securities exchanges are valued at the closing price on the
exchange or system where the security is principally traded. These securities are classified as Level 1 since
quoted prices for identical securities in active markets are available.
Debt securities. Substantially all debt securities are investment grade and include domestic- and foreign-issued
corporate bonds and U.S. government and agency bonds. These securities are valued using evaluated prices
based on observable inputs, such as dealer quotes, available trade information, spreads, bids and offers,
prepayment speeds, U.S. Treasury curves, and interest rate movements. Debt securities are classified as Level 2.
Mutual funds. Exchange-traded mutual funds listed or traded on securities exchanges are valued at the closing
price on the exchange or system where the security is principally traded. These securities are classified as Level 1
because quoted prices for identical securities in active markets are available. All other investments in mutual
funds are valued at their closing net asset values. Because net asset values are based primarily on observable
inputs, most notably quoted prices for the underlying assets, these nonexchange-traded investments are classified
as Level 2.
Collective investment funds. Investments in collective investment funds are valued at their closing net asset
values. Because net asset values are based primarily on observable inputs, most notably quoted prices for the
underlying assets, these investments are classified as Level 2.
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