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Liquid Alts Sizzle in Volatile September

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The liquid alternative mutual fund universe significantly outperformed the equity market and hedge funds in September, Wilshire Funds Management reported this week.

The Wilshire Liquid Alternative Index fell by 1.03% in September, compared with a 2.71% loss by the Wilshire 5000 Total Market Index, and a 0.68% gain by Barclays Capital Aggregate Bond Index.

Liquid alternatives also showed up their hedge fund counterparts in September, as the HFRX Global Hedge Fund Index fell by 2.1%.

“All five liquid alternative sub-strategies outperformed their hedge fund counterparts for the month, led by event-driven liquid alternative funds,” Wilshire Funds Management president Jason Schwarz said in a statement.

The Wilshire Liquid Alternative Index family is a joint offering between Wilshire Funds Management and Wilshire Analytics.

Sub-Strategy Performance

The Wilshire Liquid Alternative Event Driven Index, including credit, merger arbitrage and special situations funds, fell by 1.47%, compared with the HFRX Event Driven Index’s loss of 3.24%.

Wilshire said the overweight exposure to merger arbitrage deals that mutual funds tend to have compared with their hedge fund peers paid off in September, as many of the gains during the month came from merger deals, while many of the losses came from distressed and special situations investments.

Equity hedge strategies posted another negative month, with all underlying sectors except utilities and consumer staples reporting losses.

The Wilshire Liquid Alternative Equity Hedge Index, which includes long/short equity and market neutral funds, was down 1.24% in September, but well ahead of the HFRX Equity Hedge Index, which lost 2.08%.

Wilshire attributed the outperformance to alternative mutual funds’ tendency to have less exposure to international and emerging markets and more of a focus on U.S. equity markets.

The Wilshire Liquid Alternative Relative Value Index, comprising credit, convertible arbitrage and volatility funds, finished the month down 1.09%, ahead of the HFRX Relative Value Arbitrage Index by 95 basis points.

Wilshire noted that high yield credit spreads widened for the second month in a row, resulting in losses for the majority of relative value managers.

Volatility managers within the relative value space, in contrast, performed positively, with an average return of approximately 0.5%.

The Wilshire Liquid Alternative Global Macro Index, made up of systematic, discretionary, commodity and currency funds, ended September down 0.07%, 48 basis points above the HFRX Macro/CTA Index.

The Wilshire Liquid Alternative Multi-Strategy Index, which includes both single and multimanager funds, ended September down 1.04%.

— Check out Just How Hot Are Liquid Alts? on ThinkAdvisor.


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