The Wilshire Liquid Alternative Index, which provides a representative baseline for how the broad liquid alternative investment category performs, returned 0.06 per cent in March, slightly outperforming the 0.03 per cent return of the HFRX Global Hedge Fund Index.
“For the quarter, systematic, discretionary and currency strategies all contributed positively to the Index, while CTAs showed negative performance for January and March, detracting from a strong February,” says Jason Schwarz (pictured), president of Wilshire Funds Management.
The Wilshire Liquid Alternative Multi-Strategy Index, which includes both single and multi-manager funds, returned 0.08 per cent in March.
The Wilshire Liquid Alternative Equity Hedge Index, which includes long/short equity and market neutral funds, gained 0.05 per cent in March and 1.93 per cent for the first quarter in 2017, underperforming the HFRX Equity Hedge Index by 61 basis points and 77 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 were notably positive as emerging market and European equities rallied. Fundamental growth strategies continued to outperform value-oriented strategies, as the S&P Growth Index outperformed the S&P Value Index by 490 basis points during the quarter.
The Wilshire Liquid Alternative Global Macro Index, which includes systematic, discretionary, commodity and currency funds, ended March negatively, returning -0.16 per cent, but ended the first quarter positively, returning 1.17 per cent, outperforming both the HFRX Macro/CTA Index’s -0.97 per cent March return and -0.76 per cent quarterly return.
The strong gains that occurred in equity markets, the US dollar and US government yields have all diminished or reversed as the Trump trade rally has slowed down. Discretionary managers consistently performed throughout the quarter, taking advantage of the strong equity markets globally and navigating the energy markets and the Fed’s interest rate hike on 15 March. Currency managers also contributed positively to the index’s quarterly performance.
The Wilshire Liquid Alternative Event Driven Index, which includes credit, merger arbitrage and special situations funds, ended March down -0.07 per cent and returned 0.78 per cent in the first quarter, underperforming the HFRX Event Driven Index by 40 basis points and 216 basis points, respectively. Credit managers were the largest contributors to Index performance as corporate credit markets experienced positive market technicals and price appreciation, most notably within January and February. Credit risk benefited, evidenced by the Merrill Lynch High Yield CCC bond index, which tracks speculative junk bonds, gaining 520 basis points for the quarter. As a result, special situation credit and equity positions benefited during the month. Merger arbitrage strategies 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, outperforming the HFRX Relative Value Arbitrage Index, which returned -0.24 per cent. The first quarter performance was more in line, as the Relative Value Index returned 1.00 per cent versus the HFRX Index, which returned 1.02 per cent. During the first quarter, credit managers were able to take advantage of spread compression in both investment grade and high yield markets. Multi-strategy and convertible arbitrage managers also performed positively throughout the quarter. Volatility managers were the only detractors 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 during the past nine months.
