Liquid Alternatives Showing Their Strength Amid 2020’s Volatility

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Wilshire Liquid Alternative Index Up in June.

The Wilshire Liquid Alternative Index was up nearly 1% in June, continuing to show strength in navigating this year’s wild market ride. The Index is a benchmark for the performance of Liquid Alternative Funds. Longtime Wilshire Associates veteran, Jason Schwarz, said that “Markets rallied in the second quarter of 2020 due to ongoing Federal Reserve intervention and optimism surrounding the development of a Covid-19 vaccine, which continues to push markets back to pre-Covid levels.”  In light of the impact of the Covid-19 pandemic on the markets,  institutional and individual investors are continuing to look to liquid alternatives as a means of lowering volatility, enhancing downside protection, and growing returns.  

M&A Drives Event Driven

The Wilshire Liquid Liquid Alternative Equity Hedge Index returned over 7% for the quarter.  For the month, the index was up just over one percent.  Equities faced a V-shape recovery since March.  The Liquid Alternatives Event Driven Index returned over five percent for the quarter.  The performance was sparked by optimism in mergers and acquisitions, which activity puts a greater focus on this asset class.  Depending on market conditions in the months ahead, equity markets may have to focus on a “stay at home” strategy rather than value-oriented strategies.  

Other Liquid Alts Indices

The Wilshire Liquid Alternative Global Macro Index was up 0.64 percent for the quarter.  It outperformed the HFRX Macro/CTA Index, which returned 0.47 percent for the quarter.  As a result of mitigating the effects of volatile markets, convertible arbitrage managers faced a positive environment for the quarter.  The HFRX Relative Value Arbitrage Index’s quarterly return was 6.91 percent, outperforming the Wilshire Liquid Alternative Relative Value Index’s return of 6.25 percent for the quarter.  For the month, the Wilshire and HFRX indices returned 1.3 percent and 1.76 percent, respectively. 

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