PG&E 2014 Annual Report Download - page 122

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114
Absolute Return
The absolute return category includes portfolios of hedge funds that are valued using a net asset value per share based on
a variety of proprietary and non-proprietary valuation methods, including unadjusted prices for publicly-traded securities in active
markets. Hedge funds are considered Level 3 assets.
Real Assets
The real asset category includes portfolios of commodity futures, global REITS, global listed infrastructure equities, and
private real estate funds. The commodity futures, global REITS, and global listed infrastructure equities are actively traded on a
public exchange and are therefore considered Level 1 assets. Private real estate funds are valued using a net asset value per share
derived using appraisals, pricing models, and valuation inputs that are unobservable and are considered Level 3 assets.
Fixed-Income
The fixed-income category includes U.S. government securities, corporate securities, and other fixed-income securities.
U.S. government fixed-income primarily consists of U.S. Treasury notes and U.S. government bonds that are valued
based on quoted market prices or evaluated pricing data for similar securities adjusted for observable differences. These securities
are categorized as Level 1 or Level 2 assets.
Corporate fixed-income primarily includes investment grade bonds of U.S. issuers across multiple industries that are
valued based on a compilation of primarily observable information or broker quotes in non-active markets. The fair value of
corporate bonds is determined using recently executed transactions, market price quotations (where observable), bond spreads
or credit default swap spreads obtained from independent external parties such as vendors and brokers adjusted for any basis
difference between cash and derivative instruments. These securities are classified as Level 2 assets. Corporate fixed-income also
includes commingled funds that are valued using a net asset value per share and are comprised of corporate debt instruments.
Commingled funds are considered Level 2 assets. Corporate fixed-income also includes privately placed debt portfolios which are
valued using a net asset value per share using pricing models and valuation inputs that are unobservable and are considered Level 3
assets.
Other fixed-income primarily includes pass-through and asset-backed securities. Pass-through securities are valued based
on benchmark yields created using observable market inputs and are Level 2 assets. Asset-backed securities are primarily valued
based on broker quotes and are considered Level 2 assets. Other fixed-income also includes municipal bonds and Treasury futures.
Municipal bonds are valued based on a compilation of primarily observable information or broker quotes in non-active markets
and are considered Level 2 assets. Futures are valued based on unadjusted prices in active markets and are Level 1 assets.
Transfers Between Levels
Any transfers between levels in the fair value hierarchy are recognized as of the end of the reporting period. No material
transfers between levels occurred in the years ended December 31, 2014 and 2013.
Level 3 Reconciliation
The following table is a reconciliation of changes in the fair value of instruments for pension and other benefit plans that
have been classified as Level 3 for the years ended December 31, 2014 and 2013: