Wilshire Liquid Alternative Index Returns +0.11% in September

Oct 12 2016 | 8:02pm ET

Liquid alternatives underperformed their hedge fund counterparts again in September, according to new data from Wilshire Associates released Tuesday.

The Wilshire Liquid Alternative Index, which provides a representative baseline for how the broad liquid alternative investment category performs, gained 0.11% in the period, a repeat of August’s tally. In contrast, the HFRX Global Hedge Fund Index’s returned 0.55%.

Despite the underperformance, results among Wilshire’s five liquid alternative substrategy indices were mostly positive. 

The Wilshire Liquid Alternative Multi-Strategy Index, which includes both single and multimanager funds, returned 0.13% in September.

The Wilshire Liquid Alternative Equity Hedge Index, which includes long/short equity and market neutral funds, gained 0.19%, underperforming the HFRX Equity Hedge Index by 134 basis points. Long-biased equity managers experienced mixed performance as gains from healthcare sector-focused funds, covered call strategies, and fundamental long short strategies offset losses in value-oriented strategies. Long-biased managers contributed 15 basis points, while market neutral managers added 6 basis points, partially offset by short-biased managers. Exposure to Energy, Information Technology, and Utilities sectors were materially positive in September. 

The Wilshire Liquid Alternative Global Macro Index, which includes systematic, discretionary, commodity and currency funds, lost -0.46% for the month, underperforming the HFRX Macro/CTA Index’s -0.15% return. CTAs suffered at the hands of trend reversals in energy prices and fixed income, while choppy currency markets caused trouble for managers. 

“While discretionary managers posted negative returns on the month, they did have an easier time navigating the choppy markets over systematic strategies,” said Jason Schwarz, president of Wilshire Funds Management. “Systematic managers/CTA’s contributed 43 of the 46 basis point loss on the month while discretionary managers, relatively flat in September, contributed 3 basis points of loss to the index.” 

Meanwhile, the Wilshire Liquid Alternative Event Driven Index, which includes credit, merger arbitrage and special situations funds, gained 0.27% in September, outperforming the HFRX Event Driven Index by 22 basis points. Merger arbitrage strategies contributed 15 basis points to the index performance, while long-biased corporate credit strategies contributed 16 basis points to the index’s performance as recovery in the high yield credit markets continued. Multi-strategy event managers were also positive in September, contributing 5 basis points to the index return.

The Wilshire Liquid Alternative Relative Value Index, which includes credit, convertible arbitrage and volatility funds, finished the month up 0.34%, also underperforming its HFRX Relative Value Arbitrage Index benchmark by 16 basis points. Performance in this substrategy was driven by credit managers benefitting from relatively stable IG credit spreads and a tightening of high yield spreads. Credit managers contributed 30 of the 34 basis points of return, while Convertible Arbitrage, Volatility, and Multi-Strategy managers all had slightly positive performance.

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.

Based in Santa Monica, California, the firm provides services to clients in more than 20 countries representing more than 500 organizations with assets totaling more than $7 trillion, while Wilshire Funds Management advised on more than $153 billion as of June 30, 2016.

In Depth

PAAMCO: Will Inflation Deflate the Asset Bubble?

Jan 30 2018 | 9:49pm ET

As the U.S. shifts from monetary stimulus to fiscal stimulus, market pricing should...


CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Boost Hedge Fund Marketing ROI By Raising Your ROO

Feb 14 2018 | 9:57pm ET

Tasked with delivering returns on client capital, a common dilemma for many alternative...