Wilshire Liquid Alternative Index℠ returns 0.91% in July

Santa Monica, Calif., August 16, 2024 - The Wilshire Liquid Alternative Index^SM, which provides are presentative baseline for how the broad liquid alternative investment category performs, returned 0.91% in July, outperforming a 0.74% 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 July, markets experienced significant volatility driven by shifts in global monetary policy and economic data. Central bank actions, particularly from the Bank of Japan and Bank of England, alongside concerns of softening economic growth and fluctuating inflation expectations, led to mixed performance across asset classes and managers.

The Wilshire Liquid Alternative Equity Hedge Index^SM ended the month up 0.99%, outperforming the HFRX Equity Hedge Index's return of 0.71%.

• Equity hedge strategies faced a challenging July, with de-grossing and risk unwinds dominating the landscape, particularly impacting sectors like tech and industrials. While overall performance was mixed, Asia-focused funds, particularly those weighted heavily towards AI-related stocks, struggled the most, while more diversified exposures saw relatively flat to positive returns.

The Wilshire Liquid Alternatives Event Driven Index^SM ended the month up 1.45%, underperforming the HFRX Event Driven Index's monthly return of 1.46%.

• Event-driven strategies performed well in July, driven by positive developments in ongoing transactions and a narrowing of spreads, despite flat to down markets. New deal activity was robust for the summer, particularly in North America, with several significant transactions moving forward, including Altium and Equitrans/EQT.

The Wilshire Liquid Alternative Multi-Strategy Index^SM, which includes both single- and multi-manager funds, returned 0.51% in July.

The Wilshire Liquid Alternative Global Macro Index^SM ended the month down -1.62%, underperforming the HFRX Macro/CTA Index's monthly return of -1.11%.

• Macro strategies had a mixed July, with discretionary managers initially benefiting from positions in emerging market local rates before losses emerged due to political shifts in the United States. Systematic macro managers struggled, particularly due to large currency moves and the unwinding of popular trades such as short Japanese yen positions, though other asset classes were also challenging for the peer group.

The Wilshire Liquid Alternative Relative Value Index^SM ended the month up 1.54%, outperforming the HFRXRelative Value Arbitrage Index's monthly return of 1.18%.

• Relative value strategies benefited from lower bond yields and stable credit spreads, particularly in convertible bonds. However, challenges emerged in high yield and capital structure arbitrage, where some managers faced losses from their interest rate and credit hedges.

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Index Definitions

Wilshire Liquid Alternative Index℠

The Wilshire Liquid Alternative Index℠ measures the collective performance of the five Wilshire Liquid Alternative strategies that make up the Wilshire Liquid Alternative Universe. Created in 2014, with a set of time series of data beginning on December 31, 1999, the Wilshire Liquid Alternative Index (WLIQA)is designed to provide a broad measure of the liquid alternative market by combining the performance of the Wilshire Liquid Alternative Equity Hedge Index(WLIQAEH), Wilshire Liquid Alternative Global Macro Index (WLIQAGM), Wilshire Liquid Alternative Relative Value Index (WLIQARV), Wilshire Liquid Alternative Multi-Strategy Index (WLIQAMS), and Wilshire Liquid Alternative Event Driven Index (WLIQAED). Its objective is to provide a representative baseline for how the liquid alternative investment category performs as a whole.

Wilshire Liquid Alternative Equity Hedge Index℠

The Wilshire Liquid Alternative Equity Hedge Index℠ measures the performance of the equity hedge strategy component of the Wilshire Liquid Alternative Index. Equity hedge investment strategies predominantly invest in long and short equities. Its objective is to provide a broad measure of the equity hedge sub-strategy of the liquid alternative market.

Wilshire Liquid Alternative Event Driven Index℠

The Wilshire Liquid Alternative Event Driven Index℠ measures the performance of the event driven strategy component of the Wilshire Liquid Alternative Index. Event driven strategies predominantly invest in companies involved in corporate transactions such as mergers, restructuring, distressed, buy backs, or other capital structure changes. Its objective is to provide a broad measure of the event driven sub-strategy of the liquid alternative market.

Wilshire Liquid Alternative Multi-Strategy Index℠

The Wilshire Liquid Alternative Multi-Strategy Index℠ measures the performance of the multi-strategy strategy component of the Wilshire Liquid Alternative Index. Multi-strategy strategies invest in multiple alternative managers/fund of funds and replication strategies. Its objective is to provide a broad measure of the multi-strategy sub-strategy of the liquid alternative market.

Wilshire Liquid Alternative Global Macro Index℠

The Wilshire Liquid Alternative Global Macro Index℠ measures the performance of the global macro strategy component of the Wilshire Liquid Alternative Index. Global macro strategies predominantly invest in situations driven by the macro-economic environment across the capital structure as well as currencies and commodities. Its objective is to provide a broad measure of the global macro sub-strategy of the liquid alternative market.

Wilshire Liquid Alternative Relative Value Index℠

The Wilshire Liquid Alternative Relative Value Index℠ measures the performance of the relative value strategy component of the Wilshire Liquid Alternative Index. Relative value strategies are focused on the valuation discrepancy in the relationships between markets or securities. Its objective is to provide a broad measure of the relative value sub-strategy of the liquid alternative market.

HFRI Global Hedge Fund Index

The HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies; including but not limited to convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage. The strategies are asset weighted based on the distribution of assets in the hedge fund industry. Hedge Fund Research, Inc. (HFR) utilizes a UCITSIII compliant methodology to construct the HFRX Hedge Fund Indices. The methodology is based on defined and predetermined rules and objective criteria to select and rebalance components to maximize representation of the Hedge Fund Universe. HFRX Indices utilize state-of-the-art quantitative techniques and analysis; multi-level screening, cluster analysis, Monte-Carlo simulations and optimization techniques ensure that each Index is a pure representation of its corresponding investment focus.

HFRI Equity Hedge (Total) Index

Equity Hedge: Investment Managers who maintain positions both long and short in primarily equity and equity derivative securities. A wide variety of investment processes can be employed to arrive at an investment decision, including both quantitative and fundamental techniques; strategies can be broadly diversified or narrowly focused on specific sectors and can range broadly in terms of levels of net exposure, leverage employed, holding period, concentrations of market capitalizations and valuation ranges of typical portfolios. EH managers would typically maintain at least 50% exposure to, and may in some cases be entirely invested in, equities, both long and short.

HFRI Event-Driven (Total) Index

Event-Driven: Investment Managers who maintain positions in companies currently or prospectively involved in corporate transactions of a wide variety including but not limited to mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or other capital structure adjustments. Security types can range from most senior in the capital structure to most junior or subordinated, and frequently involve additional derivative securities. Event Driven exposure includes a combination of sensitivities to equity markets, credit markets and idiosyncratic, company specific developments. Investment theses are typically predicated on fundamental characteristics (as opposed to quantitative), with the realization of the thesis predicated on a specific development exogenous to the existing capital structure.

HFRI Macro/CTA Index

Macro strategy managers trade a broad range of strategies in which the investment process is predicated on movements in underlying economic variables and the impact these have on equity, fixed income, hard currency and commodity markets. Managers employ a variety of techniques, both discretionary and systematic analysis, combinations of top down and bottom up theses, quantitative and fundamental approaches and long and short term holding periods. Although some strategies employ RV techniques, Macro strategies are distinct from RV strategies in that the primary investment thesis is predicated on predicted or future movements in the underlying instruments, rather than realization of a valuation discrepancy between securities. In a similar way, while both Macro and equity hedge managers may hold equity securities, the overriding investment thesis is predicated on the impact movements in underlying macro economic variables may have on security prices, as opposed to EH, in which the fundamental characteristics on the company are the most significant and integral to investment thesis.

HFRI Relative Value Arbitrage Index

Relative Value investment managers who maintain positions in which the investment thesis is predicated on realization of a valuation discrepancy in the relationship between multiple securities. Managers employ a variety of fundamental and quantitative techniques to establish investment theses, and security typesrange broadly across equity, fixed income, derivative or other security types. Fixed income strategies are typically quantitatively driven to measure the existing relationship between instruments and, in some cases, identifyattractive positions in which the risk adjusted spread between theseinstruments represents an attractive opportunity for the investment manager. RVposition may be involved in corporate transactions also, but as opposed to ED exposures, the investment thesis is predicated on realization of a pricing discrepancy between related securities, as opposed to the outcome of the corporate transaction.

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