Western Union 2010 Annual Report Download - page 108

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before long-term capital market assumptions are determined. Consideration is given to diversification, re-balancing
and yields anticipated on fixed income securities held. Historical returns are reviewed to check for reasonableness
and appropriateness. The Company then applies this rate against a calculated value for its plan assets. The
calculated value recognizes changes in the fair value of plan assets over a five-year period.
Pension plan asset allocation at December 31, 2010 and 2009, and target allocations based on investment
policies, were as follows:
Asset Class 2010 2009
Percentage of Plan Assets
at Measurement Date
Equity investments ................................................................................................ 31% 32%
Debt securities ...................................................................................................... 69% 68%
100% 100%
Target Allocation
Equity investments.............................................................................................................. 25-35%
Debt securities.................................................................................................................... 65-75%
The assets of the Company’s Plan are managed in a third-party Trust. The investment policy and allocation of the
assets in the Trust are overseen by the Company’s Investment Council. The Company employs a total return
investment approach whereby a mix of equities and fixed income investments are used in an effort to maximize the
long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration
of plan liabilities and plan funded status. The investment portfolio contains a diversified blend of equity and fixed-
income investments. Furthermore, equity investments are diversified across United States and non-United States
stocks, as well as securities deemed to be growth, value, and small and large capitalizations. Other assets, primarily
private equity, are used judiciously in an effort to enhance long-term returns while improving portfolio
diversification. The investments in the Trust also include certain derivatives. On behalf of the Plan, investment
advisors may enter into derivative contracts to manage interest rate risks. These contracts are contractual obligations
to buy or sell a United States treasury bond or note at predetermined future dates and prices. Futures are transacted
in standardized amounts on regulated exchanges. Investment risk is measured and monitored on an ongoing basis
through quarterly investment portfolio reviews, annual liability measurements, and periodic asset and liability
studies. In early 2011, the Company revised its target asset allocation to approximately 15% in equity investments,
60% in fixed income securities and 25% in alternative investment strategies in order to increase diversification.
106