Understanding Duration Matching in Liability-Driven Strategies

As an investment manager for a pension fund, you are tasked with developing a fixed income portfolio that effectively manages liabilities. Given the projected payouts to beneficiaries over the next ten years, you have determined that a duration matching strategy would be the most suitable approach.

Please explain the concept of duration matching in the context of liability-driven investment strategies. Additionally, discuss how you would implement a duration matching strategy to manage the fund’s liabilities and the potential challenges you may face in achieving this objective.