Adjusting Pension Fund Allocation in Response to Demographic Changes

As a senior portfolio manager at a large public pension fund, you have been instructed to reassess the fund's investment strategy in light of changing demographics. The fund's current portfolio is heavily weighted in fixed income securities, primarily government bonds. With the aging population and longer life expectancy, the fund's long-term liabilities are expected to increase significantly. In addition, the board is keen to understand how changes in interest rates may impact the fund's overall health.

Your task is to suggest the most pertinent adjustment to the portfolio allocation that better aligns with the fund's objectives of maintaining liquidity while addressing the increasing liabilities due to the aging demographics.