DTE Energy 2011 Annual Report Download - page 29

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and asset class returns are evaluated and considered before long-term capital market assumptions are determined. The long-
term portfolio return is also established employing a consistent formal process, with due consideration of diversification, active
investment management and rebalancing. Peer data is reviewed to check for reasonableness. The long-term portfolio return is
also established employing a consistent formal process, with due consideration of diversification, active investment and
rebalancing. Peer data is reviewed to check for reasonableness. As a result of this process, the Company is lowering its long-
term rate of return assumptions for its pension and OPEB plans to 8.25% for 2012. The Company believes this rate is a
reasonable assumption for the long-term rate of return on its plan assets for 2012 given its investment strategy.
At December 31, 2011, the benefits related to the Company's qualified and nonqualified pension plans expected to be paid in
each of the next five years and in the aggregate for the five fiscal years thereafter are as follows:
(In millions)
2012
2013
2014
2015
2016
2017 - 2021
Total
$ 46
47
47
49
51
286
$ 526
The Company employs a total return investment approach whereby a mix of equities, fixed income and other investments are used
to maximize the long-term return on plan assets consistent with prudent levels of risk, with consideration given to the liquidity
needs of the plan. Risk tolerance is established through consideration of future plan cash flows, plan funded status, and corporate
financial considerations. The investment portfolio contains a diversified blend of equity, fixed income and other investments.
Furthermore, equity investments are diversified across U.S. and non-U.S. stocks, growth and value investment styles, and large
and small market capitalizations. Fixed income securities generally include corporate bonds of companies from diversified
industries, mortgage-backed securities, and U.S. Treasuries. Other assets such as private equity and hedge funds are used to enhance
long-term returns while improving portfolio diversification. Derivatives may be utilized in a risk controlled manner, to potentially
increase the portfolio beyond the market value of invested assets and reduce portfolio investment risk. Investment risk is measured
and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies, and quarterly investment
portfolio reviews.
Target allocations for plan assets as of December 31, 2011 are listed below:
U.S. Large Cap Equity Securities
U.S. Small Cap and Mid Cap Equity Securities
Non U.S. Equity Securities
Fixed Income Securities
Hedge Funds and Similar Investments
Private Equity and Other
22%
5%
20%
25%
20%
8%
100%