Indexing Strategies for Liability-Driven Investment

XYZ Corporation, a large pension plan, is currently evaluating its fixed income investment strategy amidst a backdrop of increasing interest rates and a volatile market environment. The pension plan has a duration target that aligns closely with the plan's projected liabilities, which are primarily based on a series of fixed cash flows due to retirements occurring over the next 15 years.

The investment committee is considering both active management and liability-driven investment strategies, with a specific focus on indexing fixed income securities. They are particularly interested in how indexing can be effectively utilized to match the duration and minimize tracking error relative to the liabilities.

Discuss the advantages and disadvantages of employing an indexing strategy for this pension plan's liability-driven investment objectives. Include considerations for potential challenges in implementation, and suggest strategies to mitigate these challenges.