Western Union 2011 Annual Report Download - page 128

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THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Pension plan asset allocation as of December 31, 2011 and 2010, and target allocations based on investment
policies, were as follows:
Percentage of Plan Assets
as of Measurement Date
Asset Class 2011 2010
Equity investments ........................................................ 17% 31%
Debt securities ........................................................... 61% 69%
Alternative investments .................................................... 22% 0%
100% 100%
Target Allocation
Equity investments ............................................................. 15%
Debt securities ................................................................. 60%
Alternative investments .......................................................... 25%
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 equity, fixed income, and alternative investments are used in an effort to
maximize the long-term return of plan assets. Risk tolerance is established through careful consideration of plan
liabilities and plan funded status. The investment portfolio contains a diversified blend of equity, fixed-income,
and alternative investments (e.g. hedge funds, royalty rights and private equity funds). 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. Alternative investments, the significant majority of which are
hedge funds, are used in an effort to enhance long-term returns while improving portfolio diversification. Hedge
fund strategy types include, but are not limited to: commodities/currencies, equity long-short, relative value,
multi-strategy, event driven, and global-macro. The Plan holds derivative contracts directly which consist of
standardized obligations to buy or sell United States treasury bonds or notes at predetermined future dates and
prices which are transacted on regulated exchanges. Additionally, derivatives are held indirectly through funds in
which the Plan is invested. Derivatives are used by the Plan to help reduce the Plan’s exposure to interest rate
volatility and to provide an additional source of return. Cash held by the Plan is used to satisfy margin
requirements on the derivatives. Investment risk is measured and monitored on an ongoing basis through
quarterly investment portfolio reviews, annual liability measurements, and periodic asset and liability studies.
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