Wilshire Liquid Alternative Index Gains +0.32% in September

Oct 11 2017 | 1:58pm ET

Most liquid alternatives continued in the winning column in September as rising equity markets were able to outweigh reversals in rates and the U.S. dollar’s trend, according to new data from Wilshire Associates. 

The company’s Wilshire Liquid Alternative Index, which provides a representative baseline for how the broad liquid alternative investment category performs, gained +0.32% after a nearly similar 0.38% in August and July’s +0.67%. The measure nonetheless underperformed the traditional hedge fund space, which earned +0.60% as measured by the benchmark HFRX Global Hedge Fund Index published by Hedge Fund Research. 

Four of Wilshire’s five liquid alternative substrategy indexes were in the green for September. Highlights:

  • Multi-Strategy: The Wilshire Liquid Alternative Multi-Strategy Index, which includes both single and multi-manager funds, returned 0.30% in September.
  • Global Macro: The Wilshire Liquid Alternative Global Macro Index, which includes systematic, discretionary, commodity and currency funds, ended September negatively, returning -0.34%, but ended the third quarter positively, returning 0.95%. The measure outperformed both the -1.03% September return and 0.66% quarterly return of the HFRX Macro/CTA Index. Discretionary global macro managers contributed 11 basis points of return, while currency managers contributed 5 basis points. CTAs detracted approximately 50 basis points for the month, and has been the case for most of the year, equity returns were not enough to offset significant losses from currencies, commodities and interest rates. 
  • Relative Value: The Wilshire Liquid Alternative Relative Value Index, which includes credit, convertible arbitrage and volatility funds, finished September up 0.16%, underperforming the HFRX Relative Value Arbitrage Index, which returned 0.25%. Third quarter performance was comparable, as the Relative Value Index returned 0.99% versus the HFRX Index, which returned 1.11%. Credit managers contributed over 30 basis points of return this month, while multi-strategy and convertible managers were relatively flat. Volatility strategies were the largest underperformers, and detracted over 10 basis points due to continued low levels of volatility. 
  • Equity Hedge: The Wilshire Liquid Alternative Equity Hedge Index, which includes long/short equity and market neutral funds, gained 0.99% in September and 2.33% for the third quarter, underperforming the HFRX Equity Hedge Index by 1.82% and 3.21%, respectively. Long-biased managers contributed 91 basis points of return, while market neutral managers added 2 basis points. Long-biased strategies benefited from rising equity markets, with positive contributions from Information Technology and Energy sector investments. Meanwhile, managers with exposure to the Consumer Staples, Utilities, and REITs sectors underperformed this month, while managers focused on European equities notably outperformed. Growth-oriented strategies also continued to materially outperform value-oriented strategies in September.
  • Event-Driven: The Wilshire Liquid Alternative Event Driven Index, which includes credit, merger arbitrage and special situations funds, ended September up 0.49% and returned 0.44% in the third quarter, underperforming the 0.79% monthly and 1.88% quarterly returns of the HFRX Event Driven Index. Credit strategies added 27 basis points of return, merger arbitrage strategies added 10 basis points, and multi strategy event strategists added 18 basis points. Credit risk was rewarded in September as leveraged credits gained amid spread compression, benefiting both special situation equities and lower-rated high yield bonds. 

“While most strategies performed well this month, CTAs were the one strategy that performed poorly, given the significant move in U.S. rates as well as the reversal of the negative U.S. dollar trend,” said Jason Schwarz, president of Wilshire Funds Management, in a statement. 

The Wilshire Liquid Alternative Index family is a joint offering between Wilshire Funds Management and Wilshire Analytics, creator of the Wilshire 5000 Total Market Index. It aims to measure the performance of diversified liquid alternative investment strategies implemented in mutual fund structures.

Founded in 1972, Wilshire Associates is an independent investment consulting and services firm that provides plan sponsors, investment managers and financial intermediaries with a wide range of services. Its business units include Wilshire Analytics, Wilshire Consulting, Wilshire Funds Management and Wilshire Private Markets, and it is home to the Wilshire 5000 Total Market Index. Based in Santa Monica, California, the firm provides services to clients in more than 20 countries representing more than 500 organizations with assets totaling approximately $8 trillion.


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