PG&E 2013 Annual Report Download - page 95

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 11: EMPLOYEE BENEFIT PLANS (Continued)
holdings in equity and fixed-income investments by exhibiting returns with low correlation to the direction of these
markets. Real assets include commodities futures, REITS, global listed infrastructure equities, and private real estate
funds. Absolute return investments include hedge fund portfolios.
Target allocations for equity investments have generally declined in favor of longer-maturity fixed-income
investments and real assets as a means of dampening future funded status volatility. Derivative instruments such as
equity index futures contracts are used to maintain existing equity exposure while adding exposure to fixed-income
securities. In addition, derivative instruments such as equity index futures and fixed income futures are used to
rebalance the fixed income/equity allocation of the pension’s portfolio. Foreign currency exchange contracts are also
used to hedge a portion of the currency of the global equity investments.
PG&E Corporation and the Utility apply a risk management framework for managing the risks associated with
employee benefit plan trust assets. The guiding principles of this risk management framework are the clear
articulation of roles and responsibilities, appropriate delegation of authority, and proper accountability and
documentation. Trust investment policies and investment manager guidelines include provisions designed to ensure
prudent diversification, manage risk through appropriate use of physical direct asset holdings and derivative
securities, and identify permitted and prohibited investments.
The target asset allocation percentages for major categories of trust assets for pension and other benefit plans
are as follows:
Pension Benefits Other Benefits
2014 2013 2012 2014 2013 2012
Global equity securities .......... 25% 25% 35% 30% 28% 38%
Absolute return ............... 5% 5% 5% 3% 4% 4%
Real assets ................... 10% 10% 10% 8% 8% 8%
Extended fixed-income securities . . . 3% 3% 3% —% —% —%
Fixed-income securities .......... 57% 57% 47% 59% 60% 50%
Total ....................... 100% 100% 100% 100% 100% 100%
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