Raytheon 2014 Annual Report Download - page 121

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
112
Fair Value Measurements at December 31, 2013
(In millions) Total Level 1 Level 2 Level 3
U.S. equities
All capitalization(1) $ 6,647 $ 2,805 $ 3,842 $ —
International equities
Developed markets(1) 3,136 2,225 911 —
Emerging markets(1) 488 393 95 —
Fixed-income securities
U.S. Government and agency securities 93 93 — —
Corporate debt securities/instruments
Investment grade bonds(2) 1,477 — 1,477 —
Non-investment grade bonds(2) 427 — 427 —
Emerging market debt 51 51 — —
Core fixed-income(3) 1,326 1,228 98 —
Global multi-sector fixed-income(4) 97 97 — —
Fixed-income hedge funds(5) 171 — 164 7
Securitized(6) 754 — 754 —
Convertible(7) 207 207 — —
Cash and cash equivalents(8) 1,239 561 678 —
Other funds
Absolute return funds(9)
Relative value(10) 464 — 318 146
Event driven(11) 323 — 168 155
Equity hedge(12) 329 — 323 6
Macro(13) 201 — 191 10
Multi-strategy(14) 125 — — 125
Private equity funds(15) 598 — — 598
Private real estate funds 537 — 208 329
Insurance contracts 26 — — 26
Other(16) 106 — — 106
Total $18,822 $ 7,660 $ 9,654 $ 1,508
(1) U.S. and International equities primarily include investments across the spectrum of large, medium and small market capitalization stocks.
(2) Investment grade bonds are fixed-income securities with a rating equivalent to a Standard & Poor's rating of BBB- or better. Non-investment grade
bonds have a rating equivalent to a Standard & Poor's rating of BB+ or less.
(3) Core fixed-income securities are funds that invest primarily in intermediate-term high quality domestic bonds issued by various governmental or private
sector entities.
(4) Global multi-sector fixed-income investments are funds that invest globally among several sectors including governments, investment grade corporate
bonds, high yield corporate bonds and emerging market bonds.
(5) Fixed-income hedge funds can employ numerous strategies and seek to hedge some of the risk inherent in their investments by using a variety of
methods, including short selling and derivative instruments.
(6) Securitized fixed-income securities pool together various cash flow producing financial assets that are structured in a way that can achieve desired
targeted credit, maturity or other characteristics and are typically collateralized by residential mortgages, commercial mortgages and other assets.
(7) Convertible fixed-income securities are funds that invest in bonds that can be converted into a predetermined amount of the issuer's equity at certain
times during the life of the bond, usually at the discretion of the bondholder.
(8) Cash and cash equivalents are invested in highly liquid money market funds. Included in cash and cash equivalents is excess cash in investment manager
accounts. This cash is available for immediate use and is used to fund daily operations and execute the investment policy. This amount is not considered
to be part of the cash target allocation set forth in the investment policy.
(9) Absolute return funds seek returns that are less volatile than long only funds under all market conditions.
(10) Relative value fund strategies seek to capture arbitrage opportunities created by price discrepancies between related equity, debt and derivative financial
instruments while minimizing or neutralizing market risk.
(11) Event driven fund strategies seek to capture return opportunities created by special situations and corporate events tied to corporate merger and
acquisition activity, restructuring, bankruptcy or financial distress.