Evaluating Pension Fund Asset Allocation Strategies

Imagine you are an investment consultant for a large pension fund. Recently, the fund's board has expressed concerns about its current asset allocation strategy and its alignment with the fund’s long-term liabilities. They are particularly interested in understanding the implications of a shift toward a more equity-oriented approach versus maintaining a conservative fixed-income strategy.

In your response, outline the factors that you would consider when evaluating the appropriateness of the current asset allocation for the pension fund, particularly in relation to its liabilities, risk tolerance, and investment horizon. Discuss how these factors influence the potential shift in strategy and their implications for the fund's future performance.