What is the objective of liability-relative asset allocation?

The objective of liability-relative asset allocation is to ensure that an investor's asset allocation strategy is primarily focused on meeting future liabilities while also having some flexibility to invest excess assets for growth. This approach emphasizes the importance of aligning the investment horizon and risk profile of the assets with the timing and amount of the liabilities.

By prioritizing the funding of liabilities, the investor can make informed decisions about which types of assets to allocate to, often seeking a balance between security (to cover liabilities) and growth (to enhance overall returns). This strategy allows for a more tailored investment process, where assets are linked to specific liability streams, thus improving the likelihood of meeting those obligations without assuming excessive risk.

The other options do not capture the essence of liability-relative asset allocation. For instance, focusing solely on maximizing capital gains or reducing costs does not account for the need to meet liabilities adequately. Concentrating investments in fixed income may be part of the strategy, but it does not fully encapsulate the broader objective of aligning investments with liability funding.