There are several risks associated with alternative investments above and beyond the typical risks associated with traditional investments.
Alternative investments can have higher fees.
Alternative managers may invest in a wide variety of investments. Understanding complicated investment strategies requires more upfront and ongoing due diligence.
There can be limited transparency into the underlying holdings of these investments. Additionally, many manager evaluation tools are not as well suited for alternative investments, making a manager's investment ability more difficult to assess.
The underlying investments used in an alternative investment strategy may also be exposed to a significant lack of liquidity in stressful trading environments.