Wilshire Associates has launched two indexes aimed at bringing greater price clarity to liquid alternative mutual funds.
The firm’s Liquid Alternative Index will measure the performance of liquid alternative mutual funds. Its Focused Liquid Alternative Index is designed to help fund companies build funds of funds of liquid alternatives, or exchange-traded funds.
The news that Wilshire, creator of the Wilshire 5000 Total Market Index, has created a daily valuing system for liquid alts is the latest in a long line of evidence suggesting the asset class is here to stay.
The rise of liquid alternative mutual funds in the wake of the financial crisis has been nothing short of remarkable.
About 75 options existed at the end of 2008. Today, that number is about 450, and growing, according to estimates from Wilshire.
Liquid alternative funds have been knocking at the door of 401(k) investors, claiming the benefits of diversification and hedges against downside risk for retirement savers.
But their adoption in investment menus and target date funds has been slowed by a fundamental question: how do you price and value these complex instruments?