Wilshire Liquid Alternative Index Returns Flat -0.02% In June

Jul 11 2017 | 10:30pm ET

Liquid alternatives were essentially flat in June, according to new data from Wilshire Associates, as gains in equity hedge and event-driven funds were overshadowed by a steep decline in global macro managers. 

The company’s Wilshire Liquid Alternative Index, which provides a representative baseline for how the broad liquid alternative investment category performs, returned -0.02% during the month following a +0.34% gain in May. In comparison, the result underperformed the 0.03% monthly return of its comparable hedge fund benchmark, the HFRX Global Hedge Fund Index published by Hedge Fund Research. 

Three of Wilshire’s five liquid alternative substrategy indexes were positive for the month. Details:

  • Multi-Strategy: The Wilshire Liquid Alternative Multi-Strategy Index, which includes both single and multi-manager funds, returned -0.04% in June.
  • Equity Hedge: The Wilshire Liquid Alternative Equity Hedge Index, which includes long/short equity and market neutral funds, rose 0.33% in June and 0.70% for the second quarter in 2017, underperforming the HFRX Equity Hedge Index by 53 basis points and 31 basis points, respectively. Long-biased equity managers were the largest contributors to the index’s performance, as equity markets gained in every month throughout the quarter. Global strategies slightly lagged domestic equity strategies in June, but, nonetheless, outperformed in the second quarter as European and emerging market equities materially outperformed.
  • Global Macro: The Wilshire Liquid Alternative Global Macro Index, which includes systematic, discretionary, commodity and currency funds, ended June down -1.31%. Discretionary managers performed significantly better and more consistently throughout the quarter, taking advantage of the strong global equity markets and navigating both the energy markets and the Fed’s interest rate hike on June 14th.
  • Event-Driven: The Wilshire Liquid Alternative Event Driven Index, which includes credit, merger arbitrage and special situations funds, ended June up 0.44% and returned 1.22% in the second quarter, outperforming the HFRX Event Driven Index by 47 basis points in June, but underperforming the HFRX Event Driven Index by 39 basis points. Credit managers gained as corporate credit markets experienced positive market technicals and price appreciation, most notably within April and May. As a result, managers were rewarded for credit risk and special situation credit and equity positions benefited during the periods. Merger arbitrage strategies were positive in each month of the quarter.
  • Relative Value: The Wilshire Liquid Alternative Relative Value Index, which includes credit, convertible arbitrage and volatility funds, finished June up 0.31%, outperforming the HFRX Relative Value Arbitrage Index, which returned 0.21%. Second quarter performance was comparable, as the Relative Value Index returned 1.14% versus the HFRX Index, which returned 0.68%. During the second quarter, credit managers took advantage of spread compression in both investment grade and high yield markets. Multi-strategy and convertible arbitrage managers also performed positively throughout the quarter, while volatility managers detracted from performance in the relative value space. Many credit managers have limited their duration in anticipation of further rate hikes, which has led to significant outperformance within the past year.

“Trends observed in the first quarter continued during the second quarter as equity markets appreciated both domestically and globally,” said Jason Schwarz, president of Wilshire Funds Management, in a statement. “More specifically, fundamental growth strategies continued to outperform value-oriented strategies, and corporate debt markets continued to exhibit positive performance as high yield credit gained each month.”

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 $8 trillion.

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