Wilshire Liquid Alternative Index falls 0.51 per cent in October

The Wilshire Liquid Alternative Index, which provides a representative baseline for how the broad liquid alternative investment category performs, returned -0.51 p[er cent in October, underperforming the -0.22 per cent monthly return of the HFRX Global Hedge Fund Index. 

The Wilshire Liquid Alternative Index family aims to deliver precise market measures for the performance of diversified liquid alternative investment strategies implemented through mutual fund structures, backed by a proprietary classification methodology.

“As we saw the beginning of a second wave of Covid-19 and a looming US presidential election, markets began to sell off in October as participants looked to reduce risk exposures,” says Jason Schwarz, Chief Operating Officer of Wilshire Associates.

The Wilshire Liquid Alternative Multi-Strategy Index, which includes both single and multi-manager funds, returned -0.98 per cent in October.

The Wilshire Liquid Alternative Equity Hedge Index ended the month down -1.46 per cent, underperforming the HFRX Equity Hedge Index’s return of -0.54 per cent.

Equity markets had a challenging month in October. Factor rotations occurred throughout the month, with value leading during the first half of October and growth rallying during the second half.

Managers were risk-on in the first half of the month as COVID-19 cases began to increase in the US and Europe. As experts forecasted a Democratic sweep in the upcoming US elections, volatility spiked and investors retreated, with equity managers reducing exposures.

• The Wilshire Liquid Alternatives Event Driven Index ended the month up 0.33 per cent, outperforming the HFRX Event Driven Index’s monthly return of -0.22 per cent.

Merger arbitrage managers had a generally positive month on the back of several large deals closing and positive momentum in M&A activity. As volatility rose in the later parts of the month, spreads widened and dispersion amongst managers rose.