Strategic Asset Allocation: Liability Relative

When using the liability-relative approach, constructing a liability-hedging portfolio should involve:

Not always. A liability glide path is most useful for underfunded pension funds.

Bingo! Since interest rate sensitivity, inflation, and credit risk are all risk factors in constructing a liability-hedging portfolio, it's best to use risk-factor modeling to manage the overlapping of various risks.

That's not it. A liability-hedging portfolio will most likely have a higher weighting toward fixed income.

a liability glide path.

risk-factor modeling.

a higher percentage weighting to equities.