Wilshire Liquid Alternative Index℠ returns -0.16% in August

Santa Monica, Calif., September 14, 2023 – The Wilshire Liquid Alternative Index^SM, which provides are presentative baseline for how the broad liquid alternative investment category performs, returned -0.16% in August, underperforming a 0.33% monthly return for 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.

In August, equity markets experienced downward pressure, with concerns centered around rising U.S. 10-year government bond yields, which peaked at 4.3%, the highest since 2007, and slumping Chinese economic data. Despite the U.S. Federal Reserve chairman's commitment to maintaining higher rates, there's a growing sentiment that government bonds are becoming a more attractive investment option, suggesting a shift in the risk-reward balance.

The Wilshire Liquid Alternative Equity Hedge Index^SM ended the month down -0.26%, underperforming the HFRX Equity Hedge Index’s return of 0.27%.

• Equity hedge managers had a challenging August. Equity long-short funds managed to limit their losses compared to global equity indices but generally incurred beta-driven losses, with equity market-neutral funds having a bit more success mitigating losses. Funds with exposure to China struggled, and Asia-focused funds generally underperformed.

The Wilshire Liquid Alternatives Event Driven Index^SM ended the month up 0.92%, underperforming the HFRX Event Driven Index’s monthly return of 1.10%.

• Europe faced challenges from general market pullbacks and varied earnings results. In Asia, the markets were difficult to navigate due to volatility, particularly surrounding China sentiment. In the United States, event driven managers generally increased their exposures in August, benefiting from the de-risking actions taken at the end of July. Merger arbitrage strategies, in particular, benefited from several positive regulatory developments.

The Wilshire Liquid Alternative Multi-Strategy Index^SM, which includes both single- and multi-manager funds, returned -0.23% in August.

The Wilshire Liquid Alternative Global Macro Index^SM ended the month down -0.85%, underperforming the HFRX Macro/CTA Index’s monthly return of -0.04%.

• Global macro managers experienced mixed performance in August. While systematic macro strategies saw resilience, especially from U.S. dollar (USD) positions, discretionary macro managers faced challenges, especially with carry trades in currencies and bullish positions inequities. Moreover, political and economic uncertainties, such as the upcoming Taiwan elections and potential U.S. rate changes, loom as potential risks on the horizon.

The Wilshire Liquid Alternative Relative Value Index^SM ended the month down -0.08%, outperforming the HFRX Relative Value Arbitrage Index’s monthly return of -0.15%.

• Relative value managers witnessed varied outcomes in August. Managers saw heightened volatility especially in rates and U.S. equities. Continued constriction of credit spreads signals a more stringent credit environment. Municipal bond activity was flat for the month.  

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