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  Wilshire Liquid Alternative Index Gains 0.32% in September

SANTA MONICA, CA, OCTOBER 11, 2017—The Wilshire Liquid Alternative IndexSM, which provides a representative baseline for how the broad liquid alternative investment category performs, returned 0.32% in September, underperforming the 0.60% 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.

“While most strategies performed well this month, CTAs were the one strategy that performed poorly, given the significant move in U.S. rates as well as the reversal of the negative U.S. dollar trend,” said Jason Schwarz, President of Wilshire Funds Management.

The Wilshire Liquid Alternative Multi-Strategy IndexSM, which includes both single and multimanager funds, returned 0.30% in September.

The Wilshire Liquid Alternative Global Macro IndexSM, which includes systematic, discretionary, commodity and currency funds, ended September negatively, returning -0.34%, but ended the third quarter positively, returning 0.95%, outperforming both the -1.03% September return and 0.66% quarterly return of the HFRX Macro/CTA Index. Discretionary global macro managers contributed 11 basis points of return, while currency managers contributed 5 basis points. CTAs detracted approximately 50 basis points for the month. As has been the case for most of the year, performance was driven entirely by equities. The equity return was not enough to offset significant losses from currencies and commodities as well as from interest rates. Performance within rates was mixed depending on the speed of the manager’s models in systematic CTAs. Discretionary managers have been able to manage the reversals of trends more effectively than their systematic counterparts.

The Wilshire Liquid Alternative Relative Value IndexSM, which includes credit, convertible arbitrage and volatility funds, finished September up 0.16%, underperforming the HFRX Relative Value Arbitrage Index, which returned 0.25%. Third quarter performance was comparable, as the Relative Value Index returned 0.99% versus the HFRX Index, which returned 1.11%. Credit managers contributed over 30 basis points of return this month, while multi-strategy and convertible managers were relatively flat. Volatility strategies were the largest underperformers, and detracted over 10 basis points due to continued low levels of volatility. Investment grade and high yield credit spreads tightened to lows not seen since 2014, while U.S. Treasury yields moved significantly, from 2.12% down to 2.05% before ending the month at 2.34% as the Fed announced they were sticking to their plan of tightening in 2017 and 2018.

The Wilshire Liquid Alternative Equity Hedge IndexSM, which includes long/short equity and market neutral funds, gained 0.99% in September and 2.33% for the third quarter in 2017, underperforming the HFRX Equity Hedge Index by 1.82% and 3.21%, respectively. Long-biased managers contributed 91 basis points of return while market neutral managers added 2 basis points. Long-biased strategies benefited from rising equity markets, with positive contributions from Information Technology and Energy sector investments. Meanwhile, managers with exposure to the Consumer Staples, Utilities, and REITs sectors underperformed this month, while managers focused on European equities notably outperformed. Growth-oriented strategies also continued to materially outperform value-oriented strategies in September.

The Wilshire Liquid Alternative Event Driven IndexSM, which includes credit, merger arbitrage and special situations funds, ended September up 0.49% and returned 0.44% in the third quarter, underperforming the 0.79% monthly and 1.88% quarterly returns of the HFRX Event Driven Index. Credit strategies added 27 basis points of return, merger arbitrage strategies added 10 basis points, and multi-strategy event strategists added 18 basis points. Credit risk was rewarded in September as leveraged credits gained amid spread compression, benefiting both special situation equities and lower-rated high yield bonds. Given the rally in oil this month, investments focused on the Energy sector also notably gained.

About Wilshire Associates

Wilshire Associates, a leading global financial services firm, provides consulting services, analytics solutions and customized investment solutions to plan sponsors, investment managers and financial intermediaries. Its business units include, Wilshire Analytics, Wilshire Consulting, Wilshire Funds Management and Wilshire Private Markets. The firm was founded in 1972, providing revolutionary technology and acting as an early innovator in the application of investment analytics and research to investment managers in the institutional marketplace. Wilshire also is credited with helping to develop the field of quantitative investment analysis that uses mathematical tools to analyze market risks. All other business units evolved from Wilshire’s strong analytics foundation. Wilshire developed the Wilshire 5000 Total Market Index and became an early innovator in creating integrated asset/liability analysis/simulation models as well as practical models in risk budgeting through beta and active risk analysis. Wilshire has grown to a firm of approximately 300 employees serving the needs of investors around the world. Based in Santa Monica, California, Wilshire provides services to clients in more than 20 countries representing more than 500 organizations with assets totaling approximately US $8 trillion.* With ten offices worldwide, Wilshire Associates and its affiliates are dedicated to providing clients with the highest quality counsel, products and services. Wilshire® and Wilshire 5000® are registered service marks of Wilshire Associates Incorporated. Wilshire 5000 Total Market IndexSM is a service mark of Wilshire Associates Incorporated.

Please visit www.wilshire.com for more information.

Twitter: @WilshireAssoc

*Client assets are as represented by Pensions & Investments (P&I), detailed in P&I’s “Largest Retirement Funds” and P&I’s “Largest Money Managers (U.S. institutional tax-exempt assets)” as of 9/30/16 and 12/31/16, and published 2/6/17 and 5/29/17, respectively.

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2017 Third Quarter Market Update
  • Presented by: Josh Emanuel, CIO, Wilshire Funds Management
  • Date: Wed., Oct. 18, 2017