Opalesque Industry Update - The Wilshire Liquid Alternative IndexSM, which provides a representative baseline for how the broad liquid alternative investment category performs, returned 0.60% in March, outperforming the -0.17% monthly return of the HFRX Global Hedge Fund Index. The Wilshire Liquid Alternative Index family is an effort of Wilshire Associates, the global investment manager, index provider and creator of the Wilshire 5000 Total Market IndexSM.
"Following a more accommodative tone from the Federal Reserve, risk assets rallied significantly in the first quarter and, as a result, many of the areas that observed weakness in the prior quarter regained investor interest in the first quarter" said Jason Schwarz, President of Wilshire Funds Management and Wilshire Analytics. The Wilshire Liquid Alternative Multi-Strategy IndexSM, which includes both single and multi-manager funds, returned 0.47% in March. The Wilshire Liquid Alternative Global Macro IndexSM, which includes systematic, discretionary, commodity and currency funds, ended the month up 2.03%, outperforming the 0.30% return of the HFRX Macro/CTA Index. The Index finished the first quarter in positive territory, returning 1.91% and outperforming the HFRX Macro/CTA Index's quarterly return of -0.87%. After incurring substantial losses during the equity market reversal in January, CTAs posted positive returns for the quarter, primarily due to long bond exposure. Discretionary macro managers also performed positively as a result of long bond and equity exposure. The Wilshire Liquid Alternative Relative Value IndexSM, which includes credit, convertible arbitrage and volatility funds, finished the month up 0.45%, outperforming the -0.16% return of the HFRX Relative Value Arbitrage Index. The Index returned 2.55% in first quarter, slightly underperforming the HFRX counterpart's fourth quarter return of 2.62%. Volatility arbitrage managers had a mixed, but generally positive, start to the year, with neutral-to-short biased managers performing positively and longer-biased strategies drawing down considerably as volatility collapsed across asset classes. Credit strategies also posted positive results as corporate spreads tightened during the quarter, especially within high yield markets. The Wilshire Liquid Alternative Equity Hedge IndexSM ended March and the first quarter up, returning 0.29% and 4.64%, respectively, though underperforming the HFRX Equity Hedge Index's monthly and quarterly returns of 0.79% and 5.95%, respectively. Following soft performance from the fourth quarter's volatility, long/short equity managers outperformed expectations on a risk-adjusted basis this quarter. Volatility precipitously declined following a more accommodative tone from central bankers, notably the Federal Reserve. U.S. focused strategies outperformed global peers and factor-based strategies posted mixed performance as certain factors continued to experience volatility. Covered call strategies outperformed the sub-strategy's average, benefiting from longer-biased exposure. Growth-oriented managers outperformed value-oriented peers as Consumer Discretionary and Information Technology sector investments rallied, while Financials lagged the broader markets. The Wilshire Liquid Alternative Event Driven IndexSM, which includes credit, merger arbitrage and special situations funds, ended March and the first quarter positive at 0.42% and 2.51%, respectively, outperforming the HFRX Event Driven Index's monthly and quarterly returns of -1.52% and 0.80%, respectively. Credit managers posted solid returns, outperforming the sub-strategy index as leveraged credits, such as high yield corporate debt, experienced spread compression following the more accommodative tone from the Federal Reserve. Merger arbitrage strategies continued to generate favorable returns, although lagging the Index as idiosyncratic transactions tend to be less impacted by the broader market swings. Additionally, soft catalyst and special situation investments benefited performance as broader risk appetite returned to the equity and credit markets.
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Industry Updates
Wilshire Liquid Alternative Index gains 0.60% in March
Thursday, April 18, 2019
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