Liquid Alts Trailed Hedge Funds in February

Global macro was up 1.5% in the month, relative value flat

In February, the Wilshire Liquid Alternative Index returned 0.8%, underperforming the HFRX Global Hedge Fund Index’s monthly return of 1.1%.

Last month, the two indexes reversed positions: the Wilshire was up 0.6%, and the HFRX was up 0.5%.

Liquid alternatives are coming off a lackluster 2016, when the index posted a 2.3% return, compared with 12% for the S&P 500 and 2.7% for the Bloomberg Barclays US Aggregate Bond Index.

The Wilshire Liquid Alternative Index family is a joint offering between Wilshire Funds Management, the global investment management business unit of Wilshire Associates Inc., and Wilshire Analytics, creator of the Wilshire 5000 Total Market Index.

In February, the global macro subindex, which comprises systematic, discretionary, commodity and currency funds, finished up 1.5%, ahead of the HFRX macro/CTA index return of 1.2%.

CTAs contributed 135 basis points of return and discretionary global macro managers added another 20 points, while currency/commodity managers were down five basis points of return.

The equity hedge subindex ended February up 1.1%, slightly behind its HFRX counterpart’s 1.2% return.

Credit, merger arbitrage and special situations funds in the event-driven subindex gained 0.5%, well behind the HFRX event-driven index return of 1.6%. Credit managers chipped in 27 basis points.

Relative value, made up of credit, convertible arbitrage and volatility funds, was February’s weak performer, ending the month flat. In contrast, the HFRX relative value arbitrage index was up 0.6%.

An option-writing manager, which was one of the biggest liquid alternative strategies, lost some 18% in February, knocking 84 basis points off the volatility space.

Credit managers contributed 55 points and multi-strategy managers 27 points, but convertible arb managers managed to add only five points.

The Wilshire Liquid Alternative Multi-Strategy Index, which includes both single and multi-manager funds, returned 1.2% in February.

“We continued to observe large-cap stocks outperforming small-cap stocks, in addition to growth strategies outperforming value strategies,” Wilshire Funds Management president Jason Schwarz said in a statement.

“Deep-value credit strategies also continued to outperform as the leveraged credit markets rallied on the anticipated pro-growth policies of the new administration.”

--- Check out Big Investors Keep Faith With Private Equity in 2017 on ThinkAdvisor.

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