Evaluating Pension Fund Strategies Amid Demographic Shifts

As a senior portfolio manager for a large pension fund, you are tasked with evaluating and improving the fund's investment strategy. The pension fund has historically been conservative, with significant allocations to fixed income securities. However, demographic shifts and increasing longevity risk are placing pressure on the fund to enhance returns while managing risk more effectively.

You are required to write an essay that addresses the following:

1. Discuss the implications of demographic changes for pension fund investment strategies.
2. Evaluate the potential benefits and risks of increasing equity exposure in the current market environment.
3. Outline appropriate asset allocation strategies that balance the need for income generation with capital appreciation.

Support your analysis with relevant financial theories and frameworks, and provide concrete examples of how successful pension funds have navigated similar challenges.