The Wilshire Liquid Alternative Index, which provides a representative baseline for how the broad liquid alternative investment category performs, returned -1.03 per cent in September, according to Wilshire Funds Management.
The Wilshire Liquid Alternative Index family is a joint offering between WFM and Wilshire Analytics, creator of the Wilshire 5000 Total Market Index. The Wilshire Liquid Alternative Multi-Strategy Index, which includes both single and multi-manager funds, ended the month down -1.04 per cent.
“Largest Money Managers (US institutional tax-exempt assets)”
“Liquid alternatives significantly outpaced the broader equity and fixed income markets in September, with the Wilshire Liquid Alternative Index returning -1.03 per cent for the month while the Wilshire 5000 Total Market Index declined -2.71 per cent and the Barclays Capital Aggregate Bond Index returned 0.68 per cent. Liquid alternatives also outperformed their hedge fund peers in September, as the HFRX Global Hedge Fund Index fell -2.07 per cent. All five liquid alternative sub-strategies outperformed their hedge fund counterpart for the month, led by event driven liquid alternative funds,” says Jason Schwarz, president of Wilshire Funds Management.
The Wilshire Liquid Alternative Event Driven Index, which includes credit, merger arbitrage and special situations funds, ended the month down -1.47 per cent, outpacing the HFRX Event Driven Index, which was down -3.24 per cent, by over 175 basis points. The overweight exposure to merger arbitrage deals that mutual funds tend to have versus their hedge fund peers once again paid off as many of the gains this month came from merger deals while many of the losses came from investments in the distressed and special situations spaces.
The Wilshire Liquid Alternative Global Macro Index, which includes systematic, discretionary, commodity and currency funds, ended September down -0.07 per cent, 48 basis points above the HFRX Macro/CTA Index’s -0.55 per cent loss. The majority of systematic CTA managers posted positive returns, while almost every discretionary manager was negative for the month. Systematic managers benefited from the sharp decline in fixed income yields, as well as the continued downward movement of commodity prices. Continuing the trend from last month, we saw a 5 per cent spread between the best and worst performing discretionary managers, and a 10 per cent spread between the best and worst performing CTA managers.
Equity hedge strategies posted another negative month, with all underlying sectors except Utilities and Consumer Staples posting negative returns. The largest detractors were the Materials, Energy and Health Care sectors, down -7.36 per cent, -6.67 per cent and -5.67 per cent, respectively. The Wilshire Liquid Alternative Equity Hedge Index, which includes long/short equity and market neutral funds, was down -1.24 per cent for the month, outperforming the HFRX Equity Hedge Index, which was down -2.08 per cent, by over 80 basis points. This outperformance can be attributed to the fact that alternative mutual funds tend to have less exposure to international and emerging markets and more of a focus on US equity markets.
The Wilshire Liquid Alternative Relative Value Index, which includes credit, convertible arbitrage and volatility funds, finished the month down -1.09 per cent, outperforming the HFRX Relative Value Arbitrage Index by nearly 100 basis points. High yield credit spreads widened for the second month in a row, resulting in losses for the majority of relative value managers. Volatility managers within the relative value space performed positively, with an average return of approximately 0.50 per cent.
