International Paper 2015 Annual Report Download - page 92

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International Paper’s U.S. pension allocations by type
of fund at December 31, and target allocations were as
follows:
Asset Class 2015 2014 Target
Allocations
Equity accounts 48% 47% 43% - 54%
Fixed income accounts 33% 33% 25% - 35%
Real estate accounts 10% 10% 7% - 13%
Other 9% 10% 8% - 17%
Total 100% 100%
The 2014 actual allocations shown represent a
weighted average of International Paper and Temple-
Inland plan assets as the TIN plan was fully merged into
the IP plan by 2015.
The fair values of International Paper’s pension plan
assets at December 31, 2015 and 2014 by asset class
are shown below. Plan assets included an immaterial
amount of International Paper common stock at
December 31, 2015 and 2014. Hedge funds disclosed
in the following table are allocated equally between
equity and fixed income accounts for target allocation
purposes.
Fair Value Measurement at December 31, 2015
Asset Class Total
Quoted
Prices in
Active
Markets
For
Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
In millions
Equities – domestic $ 2,150 $ 1,382 $ 768 $ —
Equities – international 2,563 1,818 745 —
Corporate bonds 1,286 — 1,286 —
Government securities 518 — 518 —
Mortgage backed securities 217 — 217 —
Other fixed income 275 — 265 10
Commodities 118 — 118 —
Hedge funds 894 — — 894
Private equity 492 — — 492
Real estate 1,094 — — 1,094
Risk parity funds 341 — 1 340
Cash and cash equivalents 975 975 — —
Total Investments $10,923 $ 4,175 $ 3,918 $ 2,830
Fair Value Measurement at December 31, 2014
Asset Class Total
Quoted
Prices
in
Active
Markets
For
Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
In millions
Equities – domestic $ 2,268 $ 1,380 $ 888 $ —
Equities – international 2,397 1,815 582 —
Corporate bonds 1,230 — 1,230 —
Government securities 1,282 — 1,282 —
Mortgage backed securities 172 — 172 —
Other fixed income 207 — 197 10
Commodities 170 — 170 —
Hedge funds 867 — — 867
Private equity 519 — — 519
Real estate 1,101 — — 1,101
Risk parity funds 376 — — 376
Cash and cash equivalents 329 329 — —
Total Investments $ 10,918 $ 3,524 $ 4,521 $ 2,873
Equity securities consist primarily of publicly traded
U.S. companies and international companies. Publicly
traded equities are valued at the closing prices reported
in the active market in which the individual securities
are traded.
Fixed income consists of government securities,
mortgage-backed securities, corporate bonds and
common collective funds. Government securities are
valued by third-party pricing sources. Mortgage-backed
security holdings consist primarily of agency-rated
holdings. The fair value estimates for mortgage
securities are calculated by third-party pricing sources
chosen by the custodian’s price matrix. Corporate
bonds are valued using either the yields currently
available on comparable securities of issuers with
similar credit ratings or using a discounted cash flows
approach that utilizes observable inputs, such as
current yields of similar instruments, but includes
adjustments for certain risks that may not be
observable, such as credit and liquidity risks. Common
collective funds are valued at the net asset value per
share multiplied by the number of shares held as of the
measurement date.
Commodities consist of commodity-linked notes and
commodity-linked derivatives. Commodities are valued
at closing prices determined by calculation agents for
outstanding transactions.
Hedge funds are investment structures for managing
private, loosely-regulated investment pools that can
pursue a diverse array of investment strategies with a
wide range of different securities and derivative
instruments. These investments are made through
funds-of-funds (commingled, multi-manager fund
structures) and through direct investments in individual
hedge funds. Hedge funds are primarily valued by each