Wilshire Liquid Alternative Index Returns +0.75% On Macro Strength

Mar 10 2017 | 9:20pm ET

Liquid alternatives rose in February but underperformed their traditional hedge fund brethren, according to new research from Wilshire Associates.

The Wilshire Liquid Alternative Index, which provides a representative baseline for how the broad liquid alternative investment category performs, returned 0.75% in February after gaining 0.59% gain in January. The result underperformed the 1.12% monthly return booked by its comparable hedge fund industry benchmark, the HFRX Global Hedge Fund Index published by Hedge Fund Research. 

As in January, four of five Wilshire liquid alternative substrategies were positive during the month, led by global macro funds. Highlights:

  • Multi-Strategy: The Wilshire Liquid Alternative Multi-Strategy Index, which includes both single and multi-manager funds, returned 1.20% in February.
  • Global Macro: The Wilshire Liquid Alternative Global Macro Index ended the month up 1.50%, outperforming the HFRX Macro/CTA Index’s 1.18% return. CTAs contributed 135 basis points of return while discretionary global macro managers contributed 20 basis points of return and currency/commodity managers detracted -5 basis points of return.
  • Relative Value:  The Wilshire Liquid Alternative Relative Value Index was the lone substrategy in the red, ending the month down 0.03% and sharply underperforming the HFRX Relative Value Arbitrage Index’s 0.62% return. Credit managers contributed 55 basis points of return, multi-strategy managers contributed 27 basis points, and convertible arbitrage managers contributed only 5 basis points. Meanwhile, an option-writing manager, one of the largest liquid alternative strategies, lost over 18% in February and detracted the entire 84 basis points from the volatility space.
  • Equity Hedge: The Wilshire Liquid Alternative Equity Hedge Index ended the month up 1.06%, modestly underperforming the HFRX Equity Hedge Index’s 1.17% return.  Long-biased managers contributed 110 basis points to Index performance while market neutral and short-biased managers detracted 4 basis points of return. Credit managers, meanwhile, contributed 27 basis points while merger arbitrage strategies added 15 basis points, and multi-strategy managers added 6 basis points of return.
  • Event Driven: The Wilshire Liquid Alternative Event Driven Index ended the month up 0.49%, underperforming the HFRX Event Driven Index’s 1.55% return. Credit managers contributed 27 basis points while merger arbitrage strategies added 15 basis points, and multi-strategy managers added 6 basis points of return.

“We continued to observe large-cap stocks outperforming small-cap stocks, in addition to growth strategies outperforming value strategies. Deep-value credit strategies also continued to outperform as the leveraged credit markets rallied on the anticipated pro-growth policies of the new administration,” said Jason Schwarz, president of Wilshire Funds Management, in a statement.

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.


In Depth

PAAMCO: Will Inflation Deflate the Asset Bubble?

Jan 30 2018 | 9:49pm ET

As the U.S. shifts from monetary stimulus to fiscal stimulus, market pricing should...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Boost Hedge Fund Marketing ROI By Raising Your ROO

Feb 14 2018 | 9:57pm ET

Tasked with delivering returns on client capital, a common dilemma for many alternative...