Notes to the consolidated financial statements
114
23 Pensions and other post-employment benefits (continued)
-
Ahold at a glance
Business review
Governance
Financials
Ahold
Annual Report 2015
Plan assets
The pension plan asset allocation differs per plan. On a weighted average basis, the allocation of plan assets was as follows:
million
2015
The Netherlands
2014
2015
United States
2014
Equity instruments:
Consumer goods
211
205
47
48
Financial services
236
267
68
58
Telecommunications and information
94
80
72
66
Energy and utilities
55
62
23
29
Industry
90
107
32
32
Other
4
6
51
46
Debt instruments:
Government
1,051
1,012
140
146
Corporate bonds (investment grade)
1,276
1,017
185
174
Corporate bonds (non-investment grade)
13
18
41
38
Other
60
54
Real estate:
Retail
24
40
Offices
40
45
Residential
15
30
Other
42
33
Investment funds
665
684
331
316
Derivatives:
Interest rate swaps
96
360
Forward foreign exchange contracts
(15)
(45)
Cash and cash equivalents
131
105
11
17
Other
(9)
Total
3,977
3,993
1,103
,057
Virtually all equity and debt instruments have quoted prices in active markets. Derivatives can be classified as level 2 instruments and real estate and some investment funds as level 3 instruments based on the definitions
in IFRS 13, "Fair Value Measurement." It is the policy of the Dutch pension plan to use interest rate swaps to hedge its exposure to interest rate risk. Foreign currency exposures are hedged by the use of forward foreign
exchange contracts.
In the Netherlands, the plan assets are managed by outside investment managers following investment strategies based on the composition of the plan liabilities. With the aid of Asset Liability Management modeling,
analyses are made of possible future economic scenarios and investment portfolios. Based on these analyses, investment strategies are determined to produce optimal investment returns at acceptable funding ratio risk levels.
Less favorable years can be part of these scenarios. Currently, the strategic targets for asset allocation of the Dutch pension plan are: 40% variable yield and 60% fixed income. To partially hedge against interest rate risk
exposure on the pension liabilities, the Dutch pension plan uses interest rate swap contracts.
