...in their investment policy and guidelines (IP&G)? From our internal database of IP&Gs, only 43% reference alternative investments (with varying definitions).
From those who do reference alternatives, we observe the following:
The allowed 'alternative' allocations can range from 5-20%.
The faith-groups have concern around the liquidity constraints in 'alternatives'. An example of this is the redemption notice on a hedge fund, which can range from multiple weeks to months.
The most common 'alternatives' are long/short equity funds; however, there seems to be concern around whether the 'alternatives' can be in alignment with various faith-consistent investment (FCI) criteria.
'Alternative' investment can include allocations to real estate, commodities and private capital. Generally, it is observed that 'alternatives' increase the risk-adjusted returns of most portfolios due to increased risk premia (a measure of excess return generated from the exposure to greater risk).