Net investments by asset class | Our asset classes

Asset-mix selection is the primary driver of the plan’s long-term investment performance. Broad diversification is our most important risk management tool. The plan’s board members approve the asset-mix policy at least annually, making modifications when required.

The asset-mix policy calls for a diversified portfolio, including equities (public and private), fixed income, commodities, real estate, infrastructure and timberland. Management has discretion to adjust the weighting in either direction, within board-approved limits, to take advantage of investment opportunities as they arise. In addition, the board gives management the discretion to use absolute return strategies to enhance overall fund returns.

During 2010, we reclassified some assets and adjusted certain target allocations to enable us to make better asset-mix decisions for the pension fund and to improve our reporting. For example, absolute return strategies and money-market securities were previously reported in the fixed income asset class. These assets and the performance associated with absolute return strategies are now reported separately. The fixed income asset class holds primarily nominal and real-return bonds. Real assets is a new class that encompasses our real estate, infrastructure and timberland assets, which were previously reported in the inflation-sensitive asset class.

(For the year ended December 31) ($ billions) Net investments plus contributions and other net assets (liabilities) equaled net assets available for benefits of $107.5 billion at year-end 2010.
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