The Wilshire Liquid Alternative Index, which provides a representative baseline for how the broad liquid alternative investment category performs, returned 0.20 per cent in December, underperforming the 0.86 per cent monthly return for the HFRX Global Hedge Fund Index.
The Wilshire Liquid Alternative Multi-Strategy Index, which includes both single and multi-manager funds, returned 0.38 per cent in December.
The Wilshire Liquid Alternative Equity Hedge Index, which includes long/short equity and market neutral funds, gained 0.29 per cent in December, outperforming the HFRX Equity Hedge Index by 11 basis points. Long-biased equity managers were the largest contributors to Index performance, as equity markets rallied into the year-end. Following positive performance in November, long-biased value managers once again exhibited strong performance due to their positions in companies expected to benefit from a more favourable regulatory environment for financial institutions. Exposure to small-cap stocks was materially beneficial, with the Russell 2000 Index outperforming the Russell 1000 Index by 90 basis points in December. Exposure to the financials, utilities and consumer staples sectors was also materially positive in December.
The Wilshire Liquid Alternative Global Macro Index, which includes systematic, discretionary, commodity and currency funds, ended December down 0.01 per cent, underperforming the 0.48 per cent return of the HFRX Macro/CTA Index. CTAs reversed their four-month streak of negative returns, posting positive returns in December due to positive trends in both the energy and equity markets. There was a strong surge in equity markets, the US dollar, and US government yields following the election.
“Systematic and discretionary managers took advantage of these continued trends in December, reversing the negative performance they exhibited in November,” says Jason Schwarz, president of Wilshire Funds Management. “Although currency managers were neutral performers in December, some managers benefitted from positioning that was long USD and contributed to positive returns for the month.”
The Wilshire Liquid Alternative Event Driven Index, which includes credit, merger arbitrage and special situations funds, returned 0 per cent in December, underperforming the HFRX Event Driven Index by 192 basis points. Credit managers were the largest contributors to Index performance, as corporate credit markets experienced positive market technicalities and price appreciation, and credit risk managers benefitted from a gain of 370 basis points in CCC rated junk bonds. As a result, special situations credit and equity positions also benefited in December, as merger arbitrage and multi-strategy funds were positive as a group.
The Wilshire Liquid Alternative Relative Value Index, which includes credit, convertible arbitrage and volatility funds, finished the month up 0.19 per cent, underperforming the HFRX Relative Value Arbitrage Index, which gained 0.83 per cent in December. The post-election rally continued, and credit managers who took advantage of spread compression through the remainder of the year contributed the majority of return. Multi-strategy managers also performed well, driven by their credit books, while volatility managers detracted from performance.
The Wilshire Liquid Alternative Index family is a joint offering between Wilshire Funds Management, the global investment management business unit of Wilshire Associates Incorporated, and Wilshire Analytics, creator of the Wilshire 5000 Total Market Index.
