This investment policy should take into account the plan’s liability profile, funding level and the risk tolerance of the plan’s sponsor – in terms of the sponsor’s willingness and ability to increase contributions if the investment policy does not deliver. Such a policy would then be based on input from the trustee, sponsor, management committee and actuary.
In such situations, as Bagehot put it, "…where the 'liabilities', or promises to pay, are so large, and the time at which to pay them, if exacted, is so short," borrowers must demonstrate "an instant capacity to meet engagements" (p. 11). Meeting creditors' demands for payment requires holding liquidity – cash, essentially, or close equivalents.