Wilshire Liquid Alternative Index Gains 0.10% in May, Underperforms HFRX Benchmark

Jun 10 2016 | 10:34pm ET

Liquid alternatives largely kept pace with their hedge fund peers last month but underperformed their HFRX benchmark, according to the latest data from Wilshire Funds Management.

The Wilshire Liquid Alternative Index returned a minor gain of 0.10% in May, the company said, underperforming the HFRX Global Hedge Fund Index’s 0.46% return by 36 basis points. The index provides a representative baseline for how the broad liquid alternative investment category performs.

Within the index family, the Wilshire Liquid Alternative Equity Hedge Index, which includes long/short equity and market neutral funds, was up 0.28% for the month, underperforming the HFRX Equity Hedge Index by 16 basis points. Long-biased value strategies contributed most positively, as exposure to the Consumer Staples, Financials, and Information Technology sectors materially benefitted performance. Low beta names, which declined materially in April, experienced a reversal in May, benefiting lower volatility strategies. Market neutral strategies were mixed.

Meanwhile, the Wilshire Liquid Alternative Global Macro Index, which includes systematic, discretionary, commodity and currency funds, ended May down -0.82%, significantly outperforming the HFRX Macro/CTA Index’s -1.72% loss for the month.

“For March, April, and May, the Macro Index has been negative and as a result has turned the Index negative for 2016,” said Jason Schwarz, president of Wilshire Funds Management, in a statement. “Discretionary managers fared better than systematic managers this month, posting slightly positive returns, while currency and commodity strategies were mixed.”

Elsewhere, the Wilshire Liquid Alternative Event Driven Index, which includes credit, merger arbitrage and special situations funds, gained 0.63% in May, underperforming its  HFRX benchmark by 204 basis points. Special situation equity strategies experienced the largest gains due to exposure to small capitalization and event-specific situations. Merger arbitrage strategies were positive across the board, as investors moved to capture attractive merger spreads in the space.

The Wilshire Liquid Alternative Relative Value Index, which includes credit, convertible arbitrage and volatility funds, finished the month up 0.11%, outperforming the -0.11% return for the HFRX Relative Value Arbitrage Index. Convertible arbitrage and volatility strategies did well during the month, while credit and multi-strategy managers delivered more mixed performance.

“In May, we did not see the same type of spread tightening that we have during the last few months, resulting in more mixed returns for credit managers,” Schwarz added.

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 more than $7 trillion.

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