Wilshire Liquid Alternative Index℠ returns 1.73% in December and 3.76% in the Fourth Quarter
Santa Monica, Calif., February 1, 2024 – The Wilshire Liquid Alternative IndexSM, which provides a representative baseline for how the broad liquid alternative investment category performs, returned 1.73% in December and 3.76% in the fourth quarter, outperforming both a 1.39% monthly return and a 1.70% quarterly return for the HFRX Global Hedge Fund Index. The Wilshire Liquid Alternative Index family aims to deliver precise market measures for the performance of diversified liquid alternative investment strategies implemented through mutual fund structures, backed by a proprietary classification methodology.
Global financial markets ended 2023 on a high note, driven by slowing inflation and the expectation of rate cuts in 2024, with technology, small caps, and financial sectors leading the charge. Interest rates dropped significantly due to an unexpected fall in inflation, leading to a weaker U.S. dollar and mixed commodity performances.
The Wilshire Liquid Alternative Equity Hedge IndexSM ended the month up 1.82%, outperforming the HFRX Equity Hedge Index’s return of 1.60%. For the quarter, the Wilshire Liquid Alternative Equity Hedge IndexSM returned 5.46%, outperforming its HFRX counterpart’s return of 3.60%.
The Wilshire Liquid Alternatives Event Driven IndexSM ended the month up 1.20%, outperforming the HFRX Event Driven Index’s monthly return of 1.16%. Forthe quarter, the Wilshire Liquid Alternatives Event Driven IndexSM returned 2.53%, outperforming its HFRX counterpart’s return of 1.36%.
The Wilshire Liquid Alternative Multi-Strategy IndexSM, which includes both single- and multi-manager funds, returned 1.55% in December and 3.40% for the quarter.
The Wilshire Liquid Alternative Global Macro IndexSM ended the month up 0.26%, outperforming the HFRX Macro/CTA Index’s monthly return of 0.20%. For the quarter, the Wilshire Liquid Alternative Global Macro IndexSM returned -3.66%, underperforming its HFRX counterpart’s return of -1.26%.
The Wilshire Liquid Alternative Relative Value IndexSM ended the month up2.20%, outperforming theHFRX Relative Value Arbitrage Index’s monthly return of 2.13%. For the quarter,the Wilshire Liquid Alternative Relative Value IndexSM returned 4.93%, outperforming its HFRX counterpart’s return of 1.88%.
Wilshire is a leading global financial services firm and trusted partner to a diverse range of approximately 500 leading institutional investors and financial intermediaries. Our clients rely on us to improve investment outcomes for a better future. Wilshire advises on over $1.2 trillion in assets and manages $86 billion in assets as of September 30, 2023. Wilshire is headquartered in the United States with offices worldwide.
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The Wilshire Liquid Alternative Index℠ measures the collective performance of the five Wilshire Liquid Alternative strategies that make up the Wilshire Liquid Alternative Universe. Created in 2014, with a set of time series of data beginning on December 31, 1999, the Wilshire Liquid Alternative Index (WLIQA )is designed to provide a broad measure of the liquid alternative market by combining the performance of the Wilshire Liquid Alternative Equity Hedge Index (WLIQAEH), Wilshire Liquid Alternative Global Macro Index (WLIQAGM), Wilshire Liquid Alternative Relative Value Index (WLIQARV), Wilshire Liquid Alternative Multi-Strategy Index (WLIQAMS), and Wilshire Liquid Alternative Event Driven Index (WLIQAED). Its objective is to provide a representative baseline for how the liquid alternative investment category performs as a whole.
The Wilshire Liquid Alternative Equity Hedge Index℠ measures the performance of the equity hedge strategy component of the Wilshire Liquid Alternative Index. Equity hedge investment strategies predominantly invest in long and short equities. Its objective is to provide a broad measure of the equity hedge sub-strategy of the liquid alternative market.
The Wilshire Liquid Alternative Event Driven Index℠ measures the performance of the event driven strategy component of the Wilshire Liquid Alternative Index. Event driven strategies predominantly invest in companies involved in corporatetransactions such as mergers, restructuring, distressed, buy backs, or other capital structure changes. Its objective is to provide a broad measure of theevent driven
sub-strategy of the liquid alternative market.
The Wilshire Liquid Alternative Multi-Strategy Index℠ measures the performance of the multi-strategy strategy component of the Wilshire Liquid Alternative Index. Multi-strategy strategies invest in multiple alternative managers/fund of funds and replication strategies. Its objective is to provide a broad measure of the multi-strategy sub-strategy of the liquid alternative market.
The Wilshire Liquid Alternative Global Macro Index℠ measures the performance of the global macro strategy component of the Wilshire Liquid Alternative Index. Global macro strategies predominantly invest in situations driven by the macro-economic environment across the capital structure as well as currencies and commodities. Its objective is to provide a broad measure of the global macro sub-strategy of the liquid alternative market.
The Wilshire Liquid Alternative Relative Value Index℠ measures the performance of the relative value strategy component of the Wilshire Liquid Alternative Index. Relative value strategies are focused on the valuation discrepancy in the relationships between markets or securities. Its objective is to provide a broad measure of the relative value sub-strategy of the liquid alternative market.
The HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies; including but not limited to convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage. The strategies are asset weighted based on the distribution of assets in the hedge fund industry. Hedge Fund Research, Inc. (HFR) utilizes a UCITSIII compliant methodology to construct the HFRX Hedge Fund Indices. The methodology is based on defined and predetermined rules and objective criteria to select and rebalance components to maximizer epresentation of the Hedge Fund Universe. HFRX Indices utilize state-of-the-art quantitative techniques and analysis; multi-level screening, cluster analysis, Monte-Carlo simulations and optimization techniques ensure that each Index is a pure representation of its corresponding investment focus.
Equity Hedge: Investment Managers who maintain positions both long and short in primarily equity and equity derivative securities. A wide variety of investment processes can be employed to arrive at an investment decision, including both quantitative and fundamental techniques; strategies can be broadly diversified or narrowly focused on specific sectors and can range broadly in terms of levels of net exposure, leverage employed, holding period, concentrations of market capitalizations and valuation ranges of typical portfolios. EH managers would typically maintain at least 50% exposure to, and may in some cases be entirely invested in, equities, both long and short.
Event-Driven: Investment Managers who maintain positions in companies currently or prospectively involved in corporate transactions of a wide variety including but not limited to mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or other capital structure adjustments. Security types can range from most senior in the capital structure to most junior or subordinated, and frequently involve additional derivative securities. Event Driven exposure includes a combination of sensitivities to equity markets, credit markets and idiosyncratic, company specific developments. Investment theses are typically predicated on fundamental characteristics (as opposed to quantitative), with the realization of the thesis predicated on a specific development exogenous to the existing capital structure.
Macrostrategy managers trade a broad range of strategies in which the investment process is predicated on movements in underlying economic variables and the impact these have on equity, fixed income, hard currency and commodity markets. Managers employ a variety of techniques, both discretionary and systematic analysis, combinations of top down and bottom up theses, quantitative and fundamental approaches and long and short term holding periods. Although some strategies employ RV techniques, Macro strategies are distinct from RV strategies in that the primary investment thesis is predicated on predicted or future movements in the underlying instruments, rather than realization of a valuation discrepancy between securities. In a similar way, while both Macro and equity hedge managers may hold equity securities, the overriding investment thesis is predicated on the impact movements in underlying macro economicvariables may have on security prices, as opposed to EH, in which the fundamental characteristics on the company are the most significant and integral to investment thesis.
Relative Value investment managers who maintain positions in which the investment thesis is predicated on realization of a valuation discrepancy in the relationship between multiple securities. Managers employ a variety of fundamental and quantitative techniques to establish investment theses, and security types range broadly across equity, fixed income, derivative or other security types. Fixed income strategies are typically quantitatively driven to measure the existing relationship between instruments and, in some cases, identify attractive positions in which the risk adjusted spread between these instruments represents an attractive opportunity for the investment manager. RV position may be involved in corporate transactions also, but as opposed to ED exposures, the investment thesis is predicated on realization of a pricing discrepancy between related securities, as opposed to the outcome of the corporate transaction.
Wilshire is a global financial services firm providing diverse services to various types of investors and intermediaries. Wilshire’s products, services, investment approach and advice may differ between clients and all of Wilshire’s products and services may not be available to all clients. For more information regarding Wilshire’s services, please see Wilshire’s ADV Part 2 available at www.wilshire.com/ADV.
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The Wilshire® and FT Wilshire indexes are calculated by Wilshire Opco UK Limited (Wilshire Indexes). The indexes do not represent an investment. It is not possible to invest directly in an index. Exposure to an asset class represented by an index may be available through investable instruments derived from that index. Wilshire makes no representations regarding the advisability of investing in investment products based on the indexes not sponsored, endorsed, sold or promoted by Wilshire. Index returns do not reflect payment of certain sales charges or fees an investor may pay to purchase the securities underlying the index or investment vehicles intended to track the performance of the index. The imposition of these fees and charges would cause actual performance of the securities/vehicles to be lower than the index performance shown. Inclusion of a company in the Wilshire and FT Wilshire indexes does not in any way reflect an opinion of Wilshire on the investment merits of the company. Index returns are preliminary and are subject to revision. Wilshire Indexes assumes no duty to update this material. Data from Wilshire Indexes may not be disclosed, reproduced, or otherwise distributed, in whole or in part, to any other person or entity without prior written permission from Wilshire Indexes.
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The index outperformed a 0.32% monthly return for the HFRX Global Hedge Fund Index
Most major asset classes positive for quarter
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