The Wilshire Liquid Alternative Index, which provides a representative baseline for how the broad liquid alternative investment category performs, returned 1.62 per cent in June, barely outperforming the 1.61 per cent monthly return of the HFRX Global Hedge Fund Index.
The Wilshire Liquid Alternative Index family is a joint offering between Wilshire Funds Management, the global investment management business unit of Wilshire Associates, and Wilshire Analytics, creator of the Wilshire 5000 Total Market Index.
“Risk assets traded in a mixed manner during the second quarter as the market processed ongoing international trade relations, economic growth and th e Federal Reserve’s interest rate policy,” says Pictured Jason Schwarz, President of Wilshire Funds Management and Wilshire Analytics. “May was a risk-off environment, but investors reversed course in June, becoming more optimistic as trade negotiations resumed following the G20 summit in Japan.”
The Wilshire Liquid Alternative Multi-Strategy IndexSM, which includes both single and multi-manager funds, returned 1.85 per cent in June.
The Wilshire Liquid Alternative Global Macro IndexSM returned 1.59 per cent in June and 1.92 per cent for the second quarter, underperforming the 2.58 per cent monthly and 3.48 per cent quarterly returns of the HFRX Macro/CTA Index. Generally, CTAs experienced a positive quarter given the strong trends in equities and bonds in April and June, which were offset somewhat by mixed results in May given reversals in equities and a handful of commodities. Discretionary macro managers experienced mixed results during the quarter, with outperforming strategies generally holding long risk asset and US dollar positions.
The Wilshire Liquid Alternative Relative Value IndexSM returned 0.80 per cent in June, trailing the 1.14 per cent return of the HFRX Relative Value Arbitrage Index. The Index returned 1.51 per cent for the second quarter, nearly mirroring the HFRX counterpart’s quarterly return of 1.53 per cent. Corporate credit managers experienced a positive quarter given the risk-on environments in April and June. Additionally, structured credit managers posted consistent carry-driven returns throughout the quarter. Volatility arbitrage managers benefitted from the uncertainty during the month of May, as well as increased single stock index volatility dispersion.
The Wilshire Liquid Alternative Equity Hedge Index returned 3.05 per cent and 1.04 per cent in June and the second quarter, respectively. The Index outperformed the HFRX Equity Hedge Index’s monthly and quarterly returns of 0.67 per cent and 0.02 per cent, respectively. Long short equity managers made the most of their gains in the first and last months of the quarter as strained US and China relations caused the markets to sell-off in May, negatively impacting long-biased strategies. US-focused strategies outperformed their global peers and factor-based strategies posted mixed performance as certain factors continued to experience volatility. Growth-oriented managers outperformed their value-oriented peers, although Financials sector exposure, which tends to fall into the value category, narrowed the performance gap observed in recent periods.
The Wilshire Liquid Alternative Event Driven IndexSM returned 0.79 per cent and 1.13 per cent in June and the second quarter, respectively, underperforming the HFRX Event Driven Index’s monthly and quarterly returns of 1.18 per cent and 1.51 per cent, respectively. Event driven managers generally benefitted from long exposure to both equity and leveraged credit markets, while merger arbitrage strategies had a relatively quiet but positive quarter. Corporate activity continues to provide a fruitful backdrop for event driven strategies, driven by continued access to cheap credit, positive GDP growth and possible changes from the looming US presidential race.
