The Wilshire Liquid Alternative Index, which provides a representative baseline for how the broad liquid alternative investment category performs, returned 0.78 per cent in October, outperforming the 0.69 per cent return of the HFRX Global Hedge Fund Index.
“Every Wilshire liquid alternative index was notably positive this month, and CTAs significantly recovered from the negative performance seen last month due to strong equity and commodity trends in October,” says Jason Schwarz (pictured), President of Wilshire Funds Management.
The Wilshire Liquid Alternative Multi-Strategy IndexSM, which includes both single and multi-manager funds, returned 0.99 per cent in October.
The Wilshire Liquid Alternative Global Macro Index, which includes systematic, discretionary, commodity and currency funds, ended the month up 2.29 per cent, outperforming the 1.92 per cent return of the HFRX Macro/CTA Index.
CTAs contributed 220 basis points of return, which represented almost the entire index return.
Equities and commodities were the largest drivers of returns, while currencies and interest rates were flat to negative for the month.
Discretionary global macro managers contributed three basis points of return, while currency managers contributed 11 basis points.
The Wilshire Liquid Alternative Relative Value IndexSM, which includes credit, convertible arbitrage and volatility funds, ended the month up 0.08 per cent, trailing the HFRX Relative Value Arbitrage Index, which returned 0.52 per cent, by 44 basis points.
Credit and multi-strategy managers contributed the majority of the return, 14 and 8 basis points, respectively.
Volatility continued to be subdued, and volatility strategies consequently detracted 10 basis points of return this month.
Investment grade and high yield credit spreads tightened further, with investment grade spreads dropping to as low as 1 per cent intra-month. US treasury yields widened from 2.33 per cent to 2.38 per cent as earnings and economic data were generally positive.
The Wilshire Liquid Alternative Equity Hedge IndexSM, which includes long/short equity and market neutral funds, gained 0.85 per cent in October, outperforming the HFRX Equity Hedge Index by six basis points.
Long-biased managers contributed 65 basis points of return, while market neutral managers added 11 basis points.
Rising equity markets benefited long-biased strategies, with positive contributions from the Information Technology, Financials, Materials and Utilities sectors. Meanwhile, managers with exposure to the Consumer Staples, Telecommunications and Health Care sectors underperformed.
Managers focused on emerging and European markets were notable out-performers, and growth-oriented managers continued to materially outperform value-oriented managers.
The Wilshire Liquid Alternative Event Driven Index, which includes credit, merger arbitrage and special situations funds, ended October up 0.35 per cent, outperforming the HFRX Event Driven Index by 48 basis points.
Credit managers added 15 basis points of return, merger arbitrage managers added 13 basis points, and multi-strategy event managers added two basis points this month.
Managers that were long credit risk added value as lower-rated corporate bonds and loans gained.
