The Wilshire Liquid Alternative Index, which provides a representative baseline for how the broad liquid alternative investment category performs, returned -0.27 per cent in August, underperforming the 0.38 per cent monthly return of the HFRX Global Hedge Fund Index.
The Wilshire Liquid Alternative Index family is a joint offering between Wilshire Funds Management, the global investment management business unit of Wilshire Associates, and Wilshire Analytics, creator of the Wilshire 5000 Total Market Index.
“August proved to be a volatile month for risk assets, with escalating trade war rhetoric and lingering concerns over global growth, overshadowing the Federal Reserve’s decision to cut rates by 25 basis points at the end of July,” says Jason Schwarz, President of Wilshire Funds Management and Wilshire Analytics.
The Wilshire Liquid Alternative Multi-Strategy Index, which includes both single and multi-manager funds, returned -0.63 per cent in August.
The Wilshire Liquid Alternative Global Macro Index ended the month up 1.03 per cent, underperforming the 1.67 per cent return of the HFRX Macro/CTA Index.
Despite a volatile month for equities, the global rally in fixed income ultimately led to another positive month for CTAs, who maintain near-maximum long exposure. Managers also benefitted from foreign currency and Energy sector shorts.
Discretionary global macro managers also performed positively, as many were flat to short risk assets and long bonds and precious metals. However, there were a few instances of outsized losses in Argentina for EM-focused managers, following the surprise primary election result.
The Wilshire Liquid Alternative Relative Value Index ended the month virtually flat, down -0.01 per cent, mirroring the -0.02 per cent return of the HFRX Relative Value Arbitrage Index.
Credit managers posted generally positive results, with the rally in rates benefitting investment grade names versus high yield. There were a number of notable underperformers with tactically short duration given the current market environment and occasional exposure to Argentina.
The Wilshire Liquid Alternative Equity Hedge Index ended the month down -1.12 per cent, underperforming the HFRX Equity Hedge Index’s -0.17 per cent return.
Domestic and European strategies outperformed, while emerging market strategies struggled amid protests in Hong Kong as well as continued concern over global trade negotiations.
Factor-based strategies generated positive, albeit muted, performance, while Materials, Consumer Discretionary and Energy sector investments made gains, as long positions declined significantly less than shorts during the month.
The Wilshire Liquid Alternative Event Driven Index ended the month up 0.27 per cent, underperforming the HFRX Event Driven Index’s 0.51 per cent return.
Merger arbitrage and special situation strategies contributed positively, as the realisation of idiosyncratic catalysts drove performance.