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  Wilshire Liquid Alternative Index Falls -0.40% in March 2018

SANTA MONICA, CA, APRIL 12, 2018—The Wilshire Liquid Alternative IndexSM, which provides a representative baseline for how the broad liquid alternative investment category performs, returned -0.40% in March, and -0.99% for the first quarter in 2018. Both returns underperforming the -0.98% monthly return and -1.02% quarterly 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 Incorporated, and Wilshire Analytics, creator of the Wilshire 5000 Total Market IndexSM.

“With a significant increase in volatility, the first quarter was a completely different environment than we had seen over the past year and a half,” said Jason Schwarz, President of Wilshire Funds Management and Wilshire Analytics. “A sharp increase in rates led to outperformance by unconstrained bond funds, which have the ability to go underweight or short duration.”

The Wilshire Liquid Alternative Multi-Strategy IndexSM, which includes both single and multi-manager funds, returned -0.39% in March, and -1.04% for the first quarter in 2018.

The Wilshire Liquid Alternative Global Macro IndexSM, which includes systematic, discretionary, commodity and currency funds, ended the month down -0.31%, outperforming the -0.79% return of the HFRX Macro/CTA Index. The Index finished the first quarter negatively, returning -1.71%, outperforming the HFRX Macro/CTA Index’s quarterly return of -2.03%. For the quarter, systematic, discretionary, and currency strategies contributed negatively to the Index. January started extremely strong as the Wilshire Global Macro Index had its best month since the inception of the index in 2006. This was led by systematic strategies and long equity exposure due to the extended bullish trend and low volatility. However, February and March proved to be difficult as the sharp reversal in February caught managers off guard. Discretionary managers were also hurt during this sharp selloff in equities during February and March. The markets moved sideways over the next couple of months with large daily moves both to the upside and downside, which is not conducive to trend followers.

The Wilshire Liquid Alternative Relative Value IndexSM, which includes credit, convertible arbitrage, and volatility funds, finished the month down -0.05%, outperforming the -0.33% return of the HFRX Relative Value Arbitrage Index. The first quarter’s -0.01% performance underperformed the HFRX counterpart’s 0.99% return. The 10-year U.S. Treasury yield increased from 2.4% at the beginning of the year, to 2.94% mid-February, before closing out the quarter at 2.74%. This large and sudden move was due to inflation concerns after January’s Consumer Price Index (“CPI”) growth numbers increased. Inflation concerns impact both equities and interest rates; however, those concerns subsided once February CPI numbers were released. The potential tariffs and fear of a “trade war” with China led to further uncertainty and volatility throughout the quarter. Unlike traditional fixed income, many of the credit strategies were intentionally underweight duration and, therefore, did not feel the negative impact of the sudden rate rise. Volatility and convertible arbitrage managers both performed positively for the month as the increase in volatility led to more opportunities.

The Wilshire Liquid Alternative Equity Hedge IndexSM, ended March down -0.95% and the first quarter down -2.28%, underperforming the HFRX Equity Hedge Index’s -0.69% March return and underperforming the -1.17% quarterly return. Long-biased equity strategies underperformed in February and March, driven by the weak and volatile equity markets. Quantitative and systematic strategies had strong performance, while growth strategies continued to outperform value-oriented strategies. Certain put/call option strategies underperformed in the volatile environment. Growth strategies continued to outperform value investment strategies, a trend observed throughout 2017, primarily driven by Technology and Consumer Discretionary stocks’ significant gains. Market neutral strategies added positively to the index.

The Wilshire Liquid Alternative Event Driven IndexSM, which includes credit, merger arbitrage, and special situations funds, ended March down -0.70% and the first quarter up 0.21%, outperforming the HFRX Event Driven Index’s March return of -2.16% and first quarter return of -4.80%. Credit managers focused on taking credit risk in floating rate products, such as leveraged loans and structured credit, outperformed as credit spreads remained tight and interest rates rose. Merger arbitrage strategies were positive as a group and provided non-correlated returns as broader equity markets were volatile.

About Wilshire Associates

Wilshire Associates, a leading global financial services firm, provides consulting services, analytics solutions and customized investment solutions to plan sponsors, investment managers, and financial intermediaries. Its business units include, Wilshire Analytics, Wilshire Consulting, Wilshire Funds Management, and Wilshire Private Markets. The firm was founded in 1972, providing revolutionary technology and acting as an early innovator in the application of investment analytics and research to investment managers in the institutional marketplace. Wilshire also is credited with helping to develop the field of quantitative investment analysis that uses mathematical tools to analyze market risks. All other business units evolved from Wilshire’s strong analytics foundation. Wilshire developed the Wilshire 5000 Total Market Index and became an early innovator in creating integrated asset/liability analysis/simulation models as well as practical models in risk budgeting through beta and active risk analysis. Wilshire has grown to a firm of approximately 270 employees serving the needs of investors around the world. Based in Santa Monica, California, Wilshire provides services to clients in more than 20 countries representing more than 500 organizations with assets totaling approximately US $8 trillion.* With 10 offices worldwide, Wilshire Associates and its affiliates are dedicated to providing clients with the highest quality products and services. Wilshire® and Wilshire 5000® are registered service marks of Wilshire Associates Incorporated. Wilshire 5000 Total Market IndexSM is a service mark of Wilshire Associates Incorporated.

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*Client assets are as represented by Pensions & Investments (P&I), detailed in P&I’s “Largest Retirement Funds” and P&I’s “Largest Money Managers (U.S. institutional tax-exempt assets)” as of 9/30/16 and 12/31/16, and published 2/6/17 and 5/29/17, respectively.

The data and charts in this article are copyrighted and owned by Wilshire Associates Incorporated.

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