Liquid Alternatives Shed $7B in Q2/16 as Volatility Sparks Outflows

Aug 1 2016 | 6:59pm ET

Liquid alternative strategies didn’t escape the heightened volatility of the second quarter, according to the latest edition of Wilshire Associates’ Liquid Alternatives Industry Monitor.

Wilshire, a major player in the liquid alts space and home to the Wilshire Liquid Alternative Index and its related subindexes, publishes the report quarterly to provide information on index returns, fund launches and closures, asset changes, and capital flows in the liquid alternatives industry.

As with their hedge fund brethren, systematic global macro managers, who make up a significant weight in the Wilshire Liquid Alternatives Global Macro Index, took full advantage of the volatility, up 2.31% for the month. Almost across the board, CTAs and quant managers came through the Brexit-related volatility at the end of June the best of all major strategies, although several industry indicators suggest the final weeks of July were less favorable. 

Capital flows toward Global Macro strategies continued into the second quarter of 2016, Wilshire noted, with the strategy seeing $2 billion in net inflows and the only one to attract assets in the period. Meanwhile, Equity Hedge, Event Driven, Multi-Strategy, and Relative Value strategies experienced a combined $9 billion in net outflows, of which Relative Value accounted for $5 billion.

Other key highlights from the Q2 report:

  • 11 new liquid alt funds were launched in Q2: 8 equity hedge funds, 1 event driven fund, 1 global macro fund and 1 multi-strategy fund.
  • 17 funds were liquidated.
  • AUM in the liquid alternative universe dropped by $5.2 billion in the quarter, accounting for additions, liquidations, and organic growth/loss. There were approximately $7 billion in net outflows from the liquid alternatives universe.
  • AQR’s funds were the recipients of some of the largest capital inflows in the space. AQR’s Managed Futures fund held the number one spot in terms of capital allocation, seeing nearly $2 billion of net capital inflows in the second quarter, while its AQR Style Premia Alternative and AQR Long-Short Equity saw inflows of $500 million and $300 million, respectively. 
  • In the Relative Value space, Goldman Sachs Strategic Income, JPMorgan Strategic Income Opportunity, and BlackRock Strategic Income Opportunities declined significantly, with net outflows of $2.1 billion, $1.3 billion, and $1.3 billion, respectively.

Exiting the second quarter, market share by strategy in the liquid alternatives universe was as follows: 36% relative value, 24% equity hedge, 18% global macro, 16% multi-strategy, and 6% event-driven. In total, Wilshire counts some 545 funds managing $304 billion within the fast-growing liquid alternative universe, which numbered less than 100 funds in June 2009.

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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