Western Union 2012 Annual Report Download - page 120

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THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
115
Pension plan asset allocation as of December 31, 2012 and 2011, and target allocations based on investment policies, were as
follows:
Percentage of Plan Assets
as of Measurement Date
Asset Class 2012 2011
Equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16% 17%
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62% 61%
Alternative investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22% 22%
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, global-macro, relative value, event driven, and
multi-strategy. The Plan holds derivative contracts directly which consist of interest rate swap agreements, under which the Plan
is committed to pay a short-term LIBOR-based variable interest rate in exchange for a fixed interest rate based on five and ten-
year maturities. 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.