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Wilshire Liquid Alternative Index gains 0.13% in September

Friday, October 12, 2018
Opalesque Industry Update - The Wilshire Liquid Alternative IndexSM, which provides a representative baseline for how the broad liquid alternative investment category performs, returned 0.13% in September, outperforming the -0.69% 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 Incorporated, and Wilshire Analytics, creator of the Wilshire 5000 Total Market IndexSM.

"Despite continued geopolitical risks and trade disputes, equity and credit markets rallied in the third quarter. Economic fundamentals remained solid, particularly in U.S. markets, which drove asset prices higher," said Jason Schwarz, President of Wilshire Funds Management and Wilshire Analytics. "On the other hand, emerging markets continued to experience heightened risk-awareness as the region grappled certain headwinds such as a stronger U.S. dollar."

The Wilshire Liquid Alternative Multi-Strategy IndexSM, which includes both single and multi-manager funds, returned 0.22% in September.

The Wilshire Liquid Alternative Global Macro IndexSM, which includes systematic, discretionary, commodity and currency funds, ended the month down -0.25%, outperforming the -0.63% return of the HFRX Macro/CTA Index. The Index finished the third quarter in positive territory, returning 0.51%, but underperformed the HFRX Macro/CTA Index's quarterly return of 0.64%. CTA's were a positive contributor on the quarter, as a strong August for equities modestly outweighed negative months in July and September. Many discretionary macro strategies remained long U.S. dollar, but managers who got caught on the wrong side of the stress in certain emerging markets and areas of Europe brought down the index average.

The Wilshire Liquid Alternative Relative Value IndexSM, which includes credit, convertible arbitrage and volatility funds, finished the month up 0.20%, outperforming the 0.13% return of the HFRX Relative Value Arbitrage Index. The second quarter's 0.38% performance was in line the HFRX counterpart's 0.39% return. Relative value strategies were uneventful on the quarter, with the exception of a few volatility arbitrage strategies that were hurt by large idiosyncratic currency moves in regions like Turkey. Credit and convertible arbitrage managers were generally positive on the quarter. Structured credit spreads were stable, but managers with corporate credit exposure did notably well, particularly because of the recovery in the energy sector.

The Wilshire Liquid Alternative Equity Hedge IndexSM, ended September up 0.15% and the third quarter up 2.39%, outperforming the HFRX Equity Hedge Index's monthly and quarterly returns of 1.63% and -1.14%, respectively. Value-oriented strategies underperformed throughout the quarter as their long positions underperformed growth-oriented investments in Healthcare, Information Technology and Consumer Discretionary sectors. Certain factor-based strategies underperformed as several risk-premia strategies compressed in 2018. Covered call strategies outperformed this quarter, benefiting from rising equity markets. Moreover, domestic strategies outperformed global strategies as European and emerging market equities grappled with rising U.S. dollar and strained trade relations.

The Wilshire Liquid Alternative Event Driven IndexSM, which includes credit, merger arbitrage and special situations funds, ended September and the third quarter up 0.30% and 0.58%, respectively, outperforming the -0.51% and -1.07% monthly and quarterly returns of the HFRX Event Driven, respectively. Merger arbitrage strategies were positive as a group, but posted mixed results across managers due to a notable telecommunications deal-break in July. Despite the volatile July, August and September were positive months for merger arbitrage as equity markets rallied and the environment remained accommodative to merger transactions. Credit managers outperformed as credit spreads remained tight amid favorable fundamentals.

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