The Wilshire Liquid Alternative Index, which provides a representative baseline for how the broad liquid alternative investment category performs, returned 0.66 oper cent in December, underperforming the 1.22 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.
“Equities surged in the fourth quarter of 2019 across geographies thanks to improvements in investor sentiment and continued central bank support,” says Jason Schwarz, President of Wilshire Funds Management and Wilshire Analytics. “The fourth quarter was punctuated by a ‘Phase One’ trade deal between the U.S. and China and a strong pro-Brexit election result in the UK that provided a degree of certainty for investors in the near-term.”
The Wilshire Liquid Alternative Multi-Strategy Index, which includes both single and multi-manager funds, returned 0.68 per cent in December.
The Wilshire Liquid Alternative Global Macro Index returned -0.09 per cent in December and -0.48 per cent in the fourth quarter, underperforming the 0.30 per cent monthly and -0.21 per cent quarterly returns of the HFRX Macro/CTA Index. CTAs experienced mixed quarterly results, with bond-driven losses in October tempered by gains from long equity positions throughout the quarter. Fixed income, commodities and FX markets were consistently choppy and range-bound, presenting a difficult market for CTAs outside of strong uptrends in equities. Discretionary global macro managers also posted mixed results with manager performance driven by their directional exposure to developed equities.
The Wilshire Liquid Alternative Relative Value IndexSM returned 0.89 per cent in December, trailing the 1.01 per cent return of the HFRX Relative Value Arbitrage Index. The Index returned 1.40 per cent for the fourth quarter, underperforming the HFRX counterpart’s quarterly return of 1.64 per cent. Relative value credit managers were generally positive, lifted by income from structured credit and convertible arbitrage positions and stable to tightening spreads across investment grade and high yield credits.
The Wilshire Liquid Alternative Equity Hedge IndexSM returned 0.67 per cent in December and 2.67 per cent in the fourth quarter, underperforming the HFRX Equity Hedge Index’s 1.22 per cent monthly return, but outperforming its 2.64 per cent quarterly return. Long short equity managers generated consistently positive monthly returns throughout the quarter, as positive geopolitical data out of China and the UK provided some clarity to investors. U.S.-focused strategies outperformed their global peers and factor-based strategies posted mixed performance as certain factors experienced elevated volatility. Growth-oriented managers outperformed their value-oriented peers, largely a reversion after significant losses in September.
The Wilshire Liquid Alternative Event Driven Index returned 0.43 per cent and 1.29 per cent in December and the fourth quarter, respectively, underperforming the HFRX Event Driven Index’s monthly and quarterly returns of 2.03 per cent and 5.45 per cent. Event driven managers, on the back of geopolitical progress, benefitted from both the announcement and completion of corporate transactions including mergers, restructurings and buybacks. Corporate activity has remained robust relative to prior years, but after a significant decline in the third quarter, global deal activity across the capital stack picked up significantly.
