Coca Cola 2015 Annual Report Download - page 119

Investment Strategy for U.S. Pension Plans
The Company utilizes the services of investment managers to actively manage the assets of our U.S. pension plans. We have established asset allocation
targets and investment guidelines with each investment manager. Our asset allocation targets promote optimal expected return and volatility characteristics
given the long-term time horizon for fulfilling the obligations of the plan. Selection of the targeted asset allocation for U.S. plan assets was based upon a
review of the expected return and risk characteristics of each asset class, as well as the correlation of returns among asset classes. Our target allocation is a mix
of 42 percent equity investments, 30 percent fixed-income investments and 28 percent alternative investments. We believe this target allocation will enable
us to achieve the following long-term investment objectives:
(1) optimize the long-term return on plan assets at an acceptable level of risk;
(2) maintain a broad diversification across asset classes and among investment managers; and
(3) maintain careful control of the risk level within each asset class.
The guidelines that have been established with each investment manager provide parameters within which the investment managers agree to operate,
including criteria that determine eligible and ineligible securities, diversification requirements and credit quality standards, where applicable. Unless
exceptions have been approved, investment managers are prohibited from buying or selling commodities, futures or option contracts, as well as from short
selling of securities. Additionally, investment managers agree to obtain written approval for deviations from stated investment style or guidelines. As of
December 31, 2015, no investment manager was responsible for more than 8 percent of total U.S. plan assets.
Our target allocation of 42 percent equity investments is composed of 60 percent global equities, 16 percent emerging market equities and 24 percent
domestic small- and mid-cap equities. Optimal returns through our investments in global equities are achieved through security selection as well as country
and sector diversification. Investments in the common stock of our Company accounted for approximately 6 percent of our total global equities and
approximately 3 percent of total U.S. plan assets. Our investments in global equities are intended to provide diversified exposure to both U.S. and non-U.S.
equity markets. Our investments in both emerging market equities and domestic small- and mid-cap equities may experience large swings in their market
value on a periodic basis. Our investments in these asset classes are selected based on capital appreciation potential.
Our target allocation of 30 percent fixed-income investments is composed of 33 percent long-duration bonds and 67 percent with multi-strategy alternative
credit managers. Long-duration bonds are intended to provide a stable rate of return through investments in high-quality publicly traded debt securities. Our
investments in long-duration bonds are diversified in order to mitigate duration and credit exposure. Multi-strategy alternative credit managers invest in a
combination of high-yield bonds, bank loans, structured credit and emerging market debt. These investments are in lower-rated and non-rated debt securities,
which generally produce higher returns compared to long-duration bonds and also help to diversify our overall fixed-income portfolio.
In addition to equity investments and fixed-income investments, we have a target allocation of 28 percent in alternative investments. These alternative
investments include hedge funds, reinsurance, private equity limited partnerships, leveraged buyout funds, international venture capital partnerships and real
estate. The objective of investing in alternative investments is to provide a higher rate of return than that available from publicly traded equity securities.
These investments are inherently illiquid and require a long-term perspective in evaluating investment performance.
Investment Strategy for Non-U.S. Pension Plans
As of December 31, 2015, the long-term target allocation for 71 percent of our international subsidiaries' plan assets, primarily certain of our European and
Canadian plans, is 61 percent equity securities; 25 percent fixed-income securities; and 14 percent other investments. The actual allocation for the remaining
29 percent of the Company's international subsidiaries' plan assets consisted of 56 percent mutual, pooled and commingled funds; 1 percent equity securities;
3 percent fixed-income securities; and 40 percent other investments. The investment strategies of our international subsidiaries differ greatly, and in some
instances are influenced by local law. None of our pension plans outside the United States is individually significant for separate disclosure.
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