Enhancing Returns in Pension Fund Investment Strategy

You are a senior investment analyst for a large public pension fund. The fund has predominantly invested in fixed income securities, which have provided stable income but have been yielding historically low returns. In light of changing market conditions, the board of trustees has asked you to evaluate potential adjustments to the fund’s investment strategy to enhance returns while managing risk.

Discuss your recommended strategic adjustments, including an analysis of the risk-return profile associated with each recommendation. Additionally, consider the implications of these changes on the fund’s ability to meet its long-term liabilities and any necessary adjustments to the fund's current allocation.