Contrast what goals-based, liability-relative and asset-only allocation each set out to achieve

The asset-only approach seeks the best trade-off between expected return and risk for the assets themselves, typically maximising a utility or Sharpe ratio measure; liabilities enter only indirectly. The liability-relative approach aims to fund a defined set of obligations, such as pension benefits or insurance claims, so the objective is framed in surplus terms: grow assets minus liabilities while controlling the chance of a shortfall. The goals-based approach, used mainly for individuals, breaks wealth into sub-portfolios, each funding a specific goal such as lifestyle spending, education or a bequest, with a required probability of success for each. The trap is applying an asset-only objective to an investor who has clear liabilities, which can leave a volatile funded status.