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Liquid Alts Outstripped Hedge Funds in August

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The Wilshire Liquid Alternative Index returned 0.4% in August, outpacing the HFRX Global Hedge Fund Index’s 0.3% return.

“Capital markets were mixed in August, mirroring heightened geopolitical tensions and some mixed economic data,” Jason Schwarz, president of Wilshire Funds Management, said in a statement. “As a result, investors sought safe-haven assets, such as U.S. Treasuries and gold, while reducing exposures to risk-on assets, such as lower-rated corporates.

Schwarz noted that within equity markets, growth-oriented investments continued to outperform their value-oriented counterparts, including those in the financials and energy sectors.

Last month, Wilshire reported that investor allocations during the second quarter were generally positive across the industry, with approximately $3.2 billion of net inflows.

Here’s a look at how Wilshire liquid alternative sub-indexes performed in August:

Global Macro (systematic, discretionary, commodity and currency funds)

  • The global macro sub-index ended the month up 0.6%, underperforming the HFRX Macro/CTA Index by 12 basis points
  • CTAs and discretionary managers contributed 70 and 9 basis points of return
  • Currency managers detracted 15 points of return
  • Bonds, interest rates and commodities contributed positively to performance
  • Equity and currency returns were mixed across managers — in recent months, performance was driven solely by positive equity returns

Relative Value (credit, convertible arbitrage and volatility funds)

  • The relative value sub-index was up 0.3%, while the HFRX Relative Value Arbitrage Index was down 0.1%
  • Credit and multi-strategy managers contributed the majority of the return
  • Volatility strategies were slightly negative and remained at near historic lows
  • Investment-grade and high-yield credit spreads widened sharply midway through August

Equity Hedge

  • The equity hedge sub-index posted an August return of 0.4%, underperforming the 0.5% return of the HFRX Equity Hedge Index
  • Long-biased and market neutral managers contributed 21 and 9 points of return
  • Long-biased strategies benefited from positive contributions from IT, health care and utilities sector investments
  • Managers with exposure to energy and financials underperformed

Event-Driven (credit, merger arbitrage and special situations funds)

  • The event-driven sub-index was down 0.3% in August, compared with the 0.1% return of the HFRX Event Driven Index
  • Credit strategies were positive, contributing 20 basis points of return
  • Merger arbitrage strategies ended the month flat
  • Managers that were long credit risk underperformed as lower-rated corporate credits lagged for the month

Multi-Strategy (both single and multi-manager funds)

  • The multi-strategy sub-index finished August up 0.7%

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.

— Check out Liquid Alts Had $3.2 Billion Net Inflows in Q2 on ThinkAdvisor.


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