Wilshire Launches Liquid Alternative Indexes

Aug 6 2014 | 10:54am ET

Santa Monica, Calif.-based Wilshire Associates Incorporated has launched two liquid alternative indexes.

The Wilshire Liquid Alternative Index aims to measure the performance of diversified liquid alternative investment strategies implemented in mutual fund structures while the Wilshire Focused Liquid Alternative Index is a subset of the broad market index designed to help firms build investable products, such as ETFs.

Constituent mutual funds for the Wilshire Focused Liquid Alternative Index are screened based on additional criteria, including longevity of track record, correlation to equities and fixed income, and assets under management.

The new indexes draw on the expertise of two Wilshire business units: Wilshire Funds Management, the investment management arm of the firm which advises on over $130 billion in assets, and Wilshire Analytics, the technology foundation and creator of the Wilshire 5000.

Wilshire estimates that the number of liquid alternatives strategies available in the marketplace has increased nearly 500%, from approximately 75 investable options at the end of 2008 to 450 mutual fund products as of June 2014. Evaluating the performance of these liquid alternative funds, however, has proven challenging.

“Alternative investments are inherently designed to behave differently than traditional asset classes, so comparing them to well-established, long-only indices is counterintuitive,” said Jason Schwarz, president of Wilshire Funds Management, in a statement.

“Hedge fund indices are not a suitable proxy either, as their constituents may access more illiquid investments or deploy greater levels of leverage than is permissible under the regulations of the Investment Company Act of 1940.

“We have seen firsthand the surge in demand for diversifying liquid alternative strategies among the clients we advise and believe that the Wilshire Liquid Alternative Index is a powerful tool to help investors understand how these difficult-to-track mutual fund strategies are actually performing.”

Returns for the Wilshire Liquid Alternative Index are available on a daily basis from December 31, 2013 and on a monthly basis from December 31, 1999.

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