Allays hold shields incorrectly in such a way that the iron holder of a shield is inside the allay's body. See screenshots.
Steps to Reproduce:
/summon minecraft:allay ~ ~ ~ {NoAI:1b,HandItems:[{id:"minecraft:shield",Count:1b}]}/summon minecraft:allay ~ ~ ~ {NoAI:1b,HandItems:[{id:"minecraft:shield",Count:1b}]}
I can also confirm this behavior.
You can use the following command to reproduce this issue.