Wilshire Liquid Alternatives Index Dips -1.30% in January, Outperforms HFRX Benchmark

Feb 18 2016 | 10:46pm ET

Liquid alternatives slipped amid extreme market volatility in January but still managed to outperform their hedge fund peers, according to the latest data from Wilshire Funds Management.

The Wilshire Liquid Alternative Index fell -1.30% in January, outperforming the HFRX Global Hedge Fund Index by 146 basis points. The index provides a representative baseline for how the broad liquid alternative investment category performs.

Within Wilshire’s liquid alternative index family, the Wilshire Liquid Alternative Multi-Strategy Index, which includes both single and multi-manager funds, ended the month down -1.74%. The firm’s Liquid Alternative Event Driven Index, which includes credit, merger arbitrage and special situations funds, declined -1.58%, outperforming the HFRX Event Driven Index by over 220 basis points.

“Value-oriented corporate credit strategies were the largest negative contributors, as lower quality corporate debt continued to experience a challenging trading environment,” said Jason Schwarz, president of Wilshire Funds Management, in a statement.  “Merger arbitrage strategies, which trade on situation-specific merger transactions, were more resilient during this turbulent month.”

Elsewhere, the Wilshire Liquid Alternative Relative Value Index, which includes credit, convertible arbitrage and volatility funds, finished the month down -1.13%, as investors sold risk assets, rates continued to fall and high yield spreads widened for the third month in a row, noted Wilshire, adding that the ten largest relative value managers were down an average of -1.50% in January. Nonetheless, the measure outperformed HFRX Relative Value Arbitrage Index by 138 basis points. 

Wilshire also noted long-biased equity strategies experienced softer performance that was partially offset by slight gains from market neutral and short-biased strategies. The Wilshire Liquid Alternative Equity Hedge Index, which includes long/short equity and market neutral funds, was down -2.48% for the month, with the largest negative contributions coming from Materials, Financials, and Health Care sectors. Here, too, the liquid alternative measure outperformed its hedge fund benchmark, besting the HFRX Equity Hedge Index by 202 basis points. 

On the global macro side, the Wilshire Liquid Alternative Global Macro Index, which includes systematic, discretionary, commodity and currency funds, ended January up 0.99% on the strength of systematic CTA managers. On the other hand, most discretionary managers were negative for the month, as many currencies altered course from previous trends. 

The Wilshire Liquid Alternative Index family is a joint offering between Wilshire Funds Management and Wilshire Analytics, creator of the Wilshire 5000 Total Market Index. It aims to measure the performance of diversified liquid alternative investment strategies implemented in mutual fund structures.

Founded in 1972, Wilshire Associates is an independent investment consulting and services firm that provides plan sponsors, investment managers and financial intermediaries with a wide range of services. Its business units include Wilshire Analytics, Wilshire Consulting, Wilshire Funds Management and Wilshire Private Markets, and it is home to the Wilshire 5000 Total Market Index. Based in Santa Monica, California, the firm provides services to clients in more than 20 countries representing more than 500 organizations with assets totaling approximately US $8 trillion.

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