Adapting Pension Fund Strategy Amid Market Volatility

As a senior portfolio manager for a large pension fund, you are tasked with evaluating the investment strategy of the fund in light of recent market volatility. The pension fund has a liability-driven investment (LDI) approach with an emphasis on minimizing funding ratio volatility while achieving a minimum return of 6% annually. However, rising interest rates and changes in actuarial assumptions have increased the projected liabilities significantly.

Considering the fund's current asset allocation, which includes equities (40%), fixed-income securities (50%), and alternative investments (10%), analyze and propose adjustments to the investment strategy. Discuss the implications of your recommended changes on the funding status and overall risk profile of the pension fund. Include considerations of duration matching, credit risk, and potential alternative investment opportunities. Provide a detailed rationale for your recommendations, ensuring alignment with the objectives of the pension fund and its stakeholders.