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Liquid Alts End So-So Year up 2.3%

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Liquid alternatives finished the fourth quarter flat after gaining 0.2% in December to conclude a lackluster year.

The Wilshire Liquid Alternatives Index posted a 2.3% return for 2016, compared with 12% for the S&P 500 and 2.7% for the Bloomberg Barclays US Aggregate Bond Index.

The index performed roughly in line with the HFRX Global Hedge Fund Index, but fell short of the HFRI Fund Weighted Composite Index’s full-year return of 5.6%.

Wilshire reported that the year’s best liquid alts sub-strategy index was relative value, which comprises credit, convertible arbitrage and volatility funds and makes up 36% the Wilshire Liquid Alternative Index. It finished the year up 4.4%, 172 basis points ahead of the Bloomberg Barclays Agg.

The event-driven subindex gained 3.5% in 2016, the equity hedge subindex gained 2.6% and the multistrategy sub-index ended the year up 1.3%.

The year’s worst-performing substrategy was global macro, which finished down 2.1%.

Liquid alts assets decreased by $8.5 billion in the fourth quarter, bringing net outflows for the year to $34.7 billion. Assets under management at year-end stood at $289.2 billion, down from $323.9 billion at the end of 2015.

After enjoying positive flows during the first three quarters of 2016, global macro funds experienced net outflows of $3.6 billion during the fourth quarter, leading all substrategies in quarterly net outflows.

Thirty-nine new liquid alternatives funds were rolled out during the 2016, 28 of them equity hedge funds, bringing the total number of funds to 527. At the same time, 82 funds were liquidated.

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.

Following are the top 10 liquid alts funds by assets under management at the end of the fourth quarter:

  • BlackRock Strategic Income Opportunities, relative value: $29.6 billion
  • FPA Crescent, equity hedge: $16.6 billion
  • AQR Managed Futures Strategy, global macro: $12.2 billion
  • JPMorgan Strategic Income Opportunities, relative value: $12 billion
  • Goldman Sachs Strategic Income, relative value: $8.4 billion
  • PIMCO All Asset All Authority, relative value: 7.8 billion
  • Gateway, equity hedge: $7.7 billion
  • John Hancock Global Absolute Return Strategy, global macro: $6.5 billion
  • Boston Partners Long/Short Research, equity hedge: $6.5 billion
  • Wells Fargo Absolute Return, multistrategy: $6 billion

— Check out VC Market Got a ‘Reality Check’ in 2016: KPMG on ThinkAdvisor.