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Liquid Alternative Index December Commentary

January 18, 2023

Wilshire Liquid Alternative Index℠ Returns -1.27% in December and 1.78% in the Fourth Quarter

Santa Monica, Calif., January 18, 2023 - 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.


Equity markets bottomed out in early October but experienced a moderate recovery on the back of a lower-than-expected inflation print and dovish Federal Reserve(Fed) rhetoric. Markets gave back some gains in December on fears that strong economic data would reinvigorate a more hawkish stance from the Fed.


The Wilshire Liquid Alternative Equity Hedge IndexSM ended the month down -2.22%, underperforming the HFRX Equity Hedge Index’s return of -0.07%. For the quarter, the index returned 5.02%, outperforming its HFRX counterpart’s return of 1.70%.


  • Equity hedge managers performed well in the fourth quarter, as they were lifted by broader equity market performance. Reduced exposure to sectors that had     performed poorly year-to-date, combined with low gross and net exposure contributed to underperformance versus relevant equity indices. High single name dispersion continues to be driven by inflation dynamics.


  • Managers struggled with broader equity market declines in December. As in recent months, Asia-focused managers outperformed the broader peer group as COVID-19 policies continue to ease. Gross and net exposure remained suppressed heading into year end.


The Wilshire Liquid Alternatives Event Driven IndexSM ended the month down -0.36%, underperforming the HFRX Event Driven Index’s monthly return of -0.20%. For the quarter, the Wilshire Liquid Alternatives Event Driven IndexSM returned 0.80%, outperforming the HFRX Event Driven Index’s return of -2.00%.


  • Event driven managers ended the quarter moderately positive. Negative developments in several high-profile deals weighed on the peer group, while broader equity market performance provided substantial support.

  • Managers ended December on the negative side of flat. Equity market weakness outweighed positive regulatory developments and an active M&A environment heading into year end. Managers with exposure to the Rogers/Shaw deal benefitted from a positive antitrust tribunal decision.

The Wilshire Liquid Alternative Multi-Strategy IndexSM, which includes both single and multi-manager funds, returned -1.49% in December and 2.48% for the quarter.


The Wilshire Liquid Alternative Global Macro IndexSM ended the month down -2.35%, underperforming the HFRX Macro/CTA Index’s monthly return of 0.05%. For the quarter the index returned -4.65%, underperforming the HFRX Macro/CTA Index’s return of -2.19%.


  • Global macro managers posted their first negative quarter since Q4 2021.  Discretionary managers were protected by their reduced exposure to pro-inflation themes as markets priced in more dovish policy through most of the quarter. Trend followers struggled to navigate the choppy market environment as we saw reversals in equities, fixed income and currencies.


  • Macro managers saw mixed performance during the month of December, with European- and Asia-focused managers significantly outperforming their U.S.-focused counterparts. Reduced exposure to pro-inflation themes that drove returns through most of the year hurt managers as the Fed reestablished its hawkish stance.


The Wilshire Liquid Alternative Relative Value IndexSM ended the month down -0.46%, underperforming the HFRX Relative Value Arbitrage Index’s monthly return of 0.01%. For the quarter, the index returned 1.19%, under performing the HFRX Relative Value Arbitrage Index’s return of 2.33%.


  • Relative value managers ended the fourth quarter positive. Tightening spreads, rallying Treasuries, and a strong equity market backdrop supported the peer group     through the end of November.


  • December proved challenging as markets reversed course and yields began to rise. Losses were mild considering the negative backdrop. Stable spreads and positive carry benefited the structured credit space.


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