Boeing 2012 Annual Report Download - page 101

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89
The actual allocations for the pension assets at December 31 and target allocations by asset class, were
as follows:
Percentage of Plan Assets Target Allocations
Asset Class 2012 2011 2012 2011
Fixed income 49% 53% 47% 49%
Global equity 29 26 26 30
Private equity 5666
Real estate and real assets 8611 6
Global strategies 4444
Hedge funds 5565
Total 100% 100% 100% 100%
Fixed income securities are invested broadly and primarily in long duration instruments. Global equity
securities are invested broadly in U.S. and non-U.S. companies which are in various industries and
countries and through a range of market capitalizations.
Real estate and real assets include global private investments and publicly traded investments (such as
Real Estate Investment Trusts (REIT) and global infrastructure stocks). Real estate includes but is not
limited to investments in office, retail, apartment and industrial properties. Real assets include but are not
limited to investments in natural resources (such as energy, farmland and timber), commodities and
infrastructure. Private equity investment vehicles are primarily limited partnerships (LPs) and fund-of-funds
that mainly invest in U.S. and non-U.S. leveraged buyout, venture capital and special situation strategies.
Global strategies seek to capitalize on inefficiencies identified across different asset classes or markets,
primarily using long-short positions in derivatives and physical securities. Hedge fund strategy types
include, but are not limited to, event driven, relative value, long-short and market neutral.
Investment managers are retained for explicit investment roles specified by contractual investment
guidelines. Certain investment managers are authorized to invest in derivatives, such as equity or bond
futures, swaps, options and currency futures or forwards. Derivatives are used to achieve the desired
market exposure of a security or an index, transfer value-added performance between asset classes,
achieve the desired currency exposure, adjust portfolio duration or rebalance the total portfolio to the target
asset allocation.
As a percentage of total plan assets, derivative net notional amounts were 10.0% and 3.9% for fixed
income, including to-be-announced mortgage-backed securities and treasury forwards, and (0.3%) and
3.5% for global equity, currency overlay and commodities at December 31, 2012 and 2011.
Risk Management In managing the plan assets, we review and manage risk associated with funded status
risk, interest rate risk, market risk, counterparty risk, liquidity risk and operational risk. Liability matching
and asset class diversification are central to our risk management approach and are integral to the overall
investment strategy. Further, asset classes are constructed to achieve diversification by investment
strategy, by investment manager, by industry or sector and by holding. Investment manager guidelines for
publicly traded assets are specified and are monitored regularly through the custodian. Credit parameters
for counterparties have been established for managers permitted to trade over-the-counter derivatives.
Valuation is governed through several types of procedures, including reviews of manager valuation policies,
custodian valuation processes, pricing vendor practices, pricing reconciliation, and periodic, security-
specific valuation testing.