Liquid alternatives underperformed hedge funds for the second consecutive month in September.
The Wilshire Liquid Alternative Index returned 0.1%, compared with the HFRX Global Hedge Fund Index’s 0.6% return. Liquid alts finished the third quarter up 1.4%, and are up 2.3% for the year to date.
The relative value sub-index, comprising credit, convertible arbitrage and volatility funds, was again the top performing, finishing the month up 0.3%, 16 basis points behind the HFRX relative value arbitrage index. Relative value ended the third quarter up 2.4%, and through September was up 4.4%.
Credit managers contributed 30 of the 34 basis points to performance, benefiting from relatively stable investment-grade credit spreads and from a slight tightening of high yield spreads.
The equity hedge sub-index, which includes long/short equity and market neutral funds, gained 0.2% in September, underperforming the HFRX equity hedge index by 134 basis points. Equity hedge was up 1.6% for the third quarter, and up 0.9% for the year to date.
Long-biased equity managers turned in mixed performance as gains from healthcare-sector-focused funds, covered call strategies and fundamental long/short strategies offset losses in value-oriented strategies. Market-neutral strategies were generally also mixed in September.
The event-driven sub-index of credit, merger arbitrage and special situations funds gained 0.3% in September, outperforming its HFRX counterpart by 22 basis points. Event-driven managers, who reported a third-quarter return of 1.9%, are up 2.8% for the year.
Merger arbitrage strategies contributed 15 basis points to the index performance in September, while long-biased corporate credit strategies continued to benefit from the recovery in the high yield credit markets, added another 16 points. Multi-strategy event managers chipped in five points.
Systematic, discretionary, commodity and currency funds in the global macro sub-index ended September down 0.5%, underperforming the HFRX macro/CTA index loss of 0.2%. Global macro had a losing third quarter, down 0.9%, but was up 0.5% for the first nine months of the year.