Sovereign Wealth Fund Investment Considerations

A sovereign wealth fund (SWF) is a state-owned investment fund or entity that is commonly established from national savings, surplus revenues, or other sources of government income. These funds typically invest in various asset classes, including equities, fixed income, real estate, and commodities, with the primary goal of achieving a secure and stable long-term rate of return that supports the country's economic stability.

Last year, the государственный фонд, a sovereign wealth fund from a country rich in natural resources, shifted its investment strategy to increase exposure to alternative investments due to the volatility of traditional assets. The fund's management believes that diversifying into hedge funds and private equity could enhance returns during periods of low traditional asset performance.

What is the primary consideration the management of the fund should evaluate when increasing the allocation to alternative investments?