The Wilshire Liquid Alternative Index, which provides a representative baseline for how the broad liquid alternative investment category performs, returned 1.09 per cent in October.
The Wilshire Liquid Alternative Multi-Strategy Index, which includes both single and multi-manager funds, ended the month up 1.33 per cent. Following a 10 per cent loss over the last two months, the Wilshire 5000 Total Market IndexSM rebounded sharply in October, posting an 8 per cent gain. After a weaker than expected September jobs report was released at the beginning of the month, equities rallied to have their best month in six years.
The Wilshire Liquid Alternative Global Macro IndexSM, which includes systematic, discretionary, commodity and currency funds, ended October down -0.41 per cent, 53 basis points above the HFRX Macro/CTA Index’s -0.94 per cent loss. “The majority of systematic CTA managers posted negative returns due to the sharp reversal in trends from previous months, while almost every discretionary manager was positive for the month,” says Jason Schwarz (pictured), president of Wilshire Funds Management. “We continue to see significant dispersion in the global macro space between the best and worst performing managers, which enforces the need for skilful manager due diligence in the liquid alternatives space.”
Equity hedge strategies posted positive monthly performance, with all underlying sectors delivering positive returns. The Wilshire Liquid Alternative Equity Hedge Index, which includes long/short equity and market neutral funds, was up 1.96 per cent for the month, slightly outperforming the HFRX Equity Hedge Index, which was up 1.90 per cent. October’s positive performance was the second highest monthly performance for the Wilshire Liquid Alternative Equity Hedge IndexSM since emerging from the Great Recession of 2008.
The Wilshire Liquid Alternative Event Driven Index, which includes credit, merger arbitrage and special situations funds, generated a positive return of 1.02 per cent, underperforming the HFRX Event Driven Index, which was up 2.23 per cent, by 121 basis points. The overweight exposure to merger arbitrage deals that mutual funds tend to have versus their hedge fund peers dampened their participation in the equity market rally. The Wilshire Liquid Alternative Relative Value Index, which includes credit, convertible arbitrage and volatility funds, finished the month up 0.92 per cent, nearly 100 basis points below the 1.91 per cent return of the HFRX Relative Value Arbitrage Index. High yield credit spreads tightened in October, which resulted in gains for the majority of relative value managers, though hedge funds benefitted more than their liquid alternative peers.
