Which two approaches are considered liability-based mandate approaches?

Liability-based mandate approaches focus on aligning the management of assets to meet specific liabilities that an entity has or will have in the future. This approach is essential, especially for institutional investors, such as pension funds, that aim to ensure they can meet their future obligations to beneficiaries.

Cash flow matching is a technique that involves structuring the investment portfolio so that the cash inflows from investments are timed to match the cash outflows needed to meet liabilities. This guarantees that the organization has sufficient funds available when liabilities come due.

Duration matching is another liability-driven investment strategy that aims to align the duration of assets with the duration of liabilities. By matching durations, the investor can better manage the interest rate risk associated with changes in rates which could affect the funding status of the liabilities.

These two strategies are focused explicitly on understanding the timing and nature of liabilities and tailoring asset management accordingly, making them quintessential examples of liability-based mandate approaches. This clear alignment of assets with liabilities helps in managing risks linked to funding requirements effectively.