Ford 2011 Annual Report Download - page 137
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Notes to the Financial Statements
Ford Motor Company | 2011 Annual Report 135
NOTE 17. RETIREMENT BENEFITS (Continued)
Alternative Assets. Hedge funds generally hold liquid and readily priceable securities, such as public equities in long/
short funds, exchange-traded derivatives in macro/commodity trading advisor funds, and corporate bonds in credit relative
value funds. Hedge funds themselves do not have readily available market quotations, and therefore are valued using the
NAV per share provided by the investment sponsor or third party administrator. Hedge fund assets typically are
categorized as Level 3 in the fair value hierarchy, due to the inherent restrictions on redemptions that may affect our ability
to sell the investment at its NAV in the near term. Valuations may be lagged 1-3 months. For 2010 and 2011, we made
adjustments of $66 million, and $(10) million, respectively, to adjust for hedge fund lagged valuations.
Private equity and real estate investments are less liquid. External investment managers typically report valuations
reflecting initial cost or updated appraisals, which are adjusted for cash flows, and realized and unrealized gains/losses.
Private equity funds do not have readily available market quotations, and therefore are valued using the NAV per share
provided by the investment sponsor or third party administrator. These assets typically are categorized as Level 3 in the
fair value hierarchy, due to the inherent restrictions on redemptions that may affect our ability to sell the investment at its
NAV in the near term. Valuations may be lagged 1-6 months. The NAV will be adjusted for cash flows (additional
investments or contributions, and distributions) through year-end. We may make further adjustments for any known
substantive valuation changes not reflected in the NAV. For 2011, we made adjustments of $6 million to adjust for private
equity lagged valuations. For 2011, we made adjustments of $13 million to adjust for real estate lagged valuations.
The Ford Germany defined benefit plan is funded through a group insurance contract, in a pool with other policy
holders. The contract value represents the value of the underlying assets held by the insurance company (primarily
bonds) at the guaranteed rate of return. The adjustment to market asset prices to recognize contractual returns is a
significant unobservable input; therefore the contract is Level 3.