Firm Description Wilshire Associates Incorporated (“Wilshire” or “Wilshire Associates”) is a privately
held investment technology and advisory firm founded in 1972, with the current CEO
as an original co-founder. The founders’ mission was to combine actuarial science
with investment principles, and use scientific methods to help institutional investors
manage assets and liabilities simultaneously. In its early years, Wilshire introduced
its integrated asset / liability modeling technique to the industry and risk management
and portfolio optimization models to help plan sponsors and institutional investors
arrive at optimal portfolios based on their specific needs. For more than forty years,
Wilshire has been deemed a leader in the investment community by consistently
delivering innovative investment research, products and services that transform
complex theory into practical applications.
Wilshire is headquartered in Santa Monica, California with approximately 270
employees in 10 offices worldwide and is comprised of four business units.
WILSHIRE ANALYTICS Wilshire Analytics is the technology foundation of Wilshire Associates, with more
than forty years of expertise providing investment firms worldwide with multi-asset
class solutions for analytics, attribution, risk management, performance, GIPS
reporting and peer universe comparisons. Institutions served include central and
custodial banks, money management firms, insurance companies, plan sponsors,
mutual fund companies and hedge funds. Wilshire Analytics provides services in the
following broad areas:
• Wilshire Core Analytics: A suite of services for global performance attribution,
risk management and GIPS compliance. Our clients benefit from access to
comprehensive security data, time-tested models and highly flexible reporting
capabilities, combined with robust product functionality such as scenario
analysis and portfolio optimization which help them make better investment
decisions and evaluate their impact. Services include: Wilshire Axiom,
Wilshire Atlas, Wilshire Abacus, and Wilshire iQComposite;
• Wilshire Index Solutions: Wilshire provides broad and sub-market indexes,
institutional investor performance benchmarks and custom indexes;
o Wilshire’s broad and sub-market indexes (e.g., Wilshire 5000 Total
Market Index™/Wilshire Large-Cap Index™) aim to provide investors
with a more accurate measurement of a given market. Wilshire
indexes may be used to build investible products;
o Institutional investor performance benchmarks provide insight into
how institutional investors have allocated assets across US plans over
time and the impact of those decisions (e.g., Wilshire Trust Universe
Comparison Service®, Wilshire Cooperative);
o Wilshire custom indexes: clients leverage Wilshire’s index expertise to
help bring new ideas to market quickly. Services range from idea
generation, research and testing, to acting as the calculation agent
(e.g., Powered by Wilshire™).
WILSHIRE CONSULTING Wilshire Consulting provides discretionary and non-discretionary investment advisory
solutions to large corporate and public retirement plans, endowments, foundations,
insurance companies, sovereign wealth funds and other large asset owners.
Outsourced Chief Investment Officer (OCIO) consulting provides the above services
while making discretionary investment decisions in accordance with the client’s
defined mandate. Wilshire Solutions Funds Trust is a fund which operates as a pre-
packaged OCIO solution. Wilshire engages sub-advisers or invests in commingled
vehicles to manage the fund and gain desired exposures.
Non-discretionary consulting encompasses all of the traditional services provided by
a general investment consultant, including asset-liability analysis, asset allocation,
investment policy development, asset class structuring, investment manager
evaluation and monitoring, and performance measurement. For defined contribution
plans, Wilshire Consulting also assists plan sponsors in establishing custom glide
paths and target date funds.
Risk management consulting solutions assist clients in assessing and understanding
total fund risk exposures and include the development of risk policies, risk mitigation
procedures and risk re-balancing.
Wilshire CompassSM, a proprietary software application, offers clients access to the
Wilshire investment database and a sophisticated suite of analytics for asset
allocation modeling, manager search and evaluation, and total fund analysis.
Wilshire Consulting also provides educational resources, strategic advice, manager
insights and risk and performance measurements to help asset owners protect and
enhance long-term capital by integrating Environmental Social and Governance
(ESG) considerations into investment decisions.
Additionally, Wilshire Consulting provides actuarial services, both in its own capacity
and in partnership with third party providers.
WILSHIRE PRIVATE MARKETS Wilshire Private Markets (“WPM” or “Private Markets”) provides discretionary and
non-discretionary advisory solutions to assist institutional investors in building
portfolios of private markets investments that cover the full range of market
opportunities (primaries, secondaries, and co-investments), across an array of
investment types — including venture capital, leveraged buyout, private debt, real
asset, etc. Wilshire Private Markets additionally provides portfolio administration
services.
WILSHIRE FUNDS MANAGEMENT Wilshire Funds Management (“WFM”) offers discretionary and non-discretionary
investment advisory solutions, services and products to institutions, intermediaries
(including banks, broker-dealers, asset managers, mutual fund complexes, insurance
companies and retirement plan providers) and individual investors. Wilshire Funds
Management provides services in the following broad areas:
• Discretionary and non-discretionary investment strategies including long-only
and alternative asset classes;
• Investment advisory services to ERISA and non-ERISA retirement plans and
accounts, including ERISA 3(21) and 3(38) solutions, discretionary managed
accounts, asset allocation portfolios and custom target date and target risk
portfolios;
• Manager research services, including investment manager due diligence;
• Wilshire Mutual Funds and Wilshire Managed Portfolios consisting of multi-
manager and/or multi-asset class portfolios delivered directly to financial
institutions, including broker-dealers and RIAs;
• A managed account platform for investing in hedge fund and risk premia
strategies, delivering discretionary services to qualified purchasers and
institutions globally.
Wilshire Funds Management engages sub-advisors to manage portions of its
discretionary funds. It may also be engaged as a sub-advisor by third-party funds.
Wilshire Funds Management includes Wilshire’s manager research team, which
produces manager evaluations. Members of that group may participate in providing
certain services to financial services providers, including investment managers and
financial services providers that Wilshire may recommend to advisory clients.
Principal Owners
Wilshire is a privately held Subchapter S corporation that is 100% owned by its
active key employees. Wilshire has no other outside owners. Wilshire periodically
offers its key employees an opportunity to acquire equity ownership in the firm,
enabling them to become principals. As of December 31, 2018, Wilshire had
approximately 44 principals, each of whom holds the title of Vice President, Senior
Vice President, Managing Director, or President. The founder and CEO of Wilshire
Associates, Dennis Tito, is the majority shareholder of the firm, and no single
individual other than Mr. Tito owns more than 10% of the shares of the firm. Retired
individuals do not have any ownership interest in the firm.
Types of Advisory Services Wilshire provides discretionary and non-discretionary investment advisory services
with assets under advisement of approximately $1.1 trillion as of December 31,
2018. Wilshire provides non-discretionary advisory services in support of investors
seeking risk-managed investment solutions. Wilshire has approximately $60.5 billion
in assets under management, providing discretionary investment services with
respect to funds or accounts as follows:
▪ Wilshire sponsored funds including Wilshire Private Market’s funds, the
Wilshire Mutual Funds and VITs, the Wilshire Solutions Funds Trust and the
Wilshire Institutional Master funds;
▪ Funds sponsored by third parties for which Wilshire serves as sub-adviser
with discretion over security selection, asset allocation and/or manager
selection;
▪ OCIO services where Wilshire has the discretion to hire and terminate
investment managers and rebalance portfolio assets;
▪ Model portfolios where Wilshire has discretion over the model;
▪ Delegated consulting where Wilshire has the discretion to adjust the asset
allocation of a portfolio to meet the ranges dictated by the chosen glide path;
and
▪ Defined contribution plans where Wilshire has the discretion over the fund
line-up offered to plan participants.
Wilshire’s services or advice may differ between clients (including discretionary
accounts) even where similarly situated. Clients may utilize different classes of the
same issuer that have different rights, including, without limitation, with respect to
liquidity and fees. The exercise of differentiated rights on behalf of one client may
impact the ability of another client to engage in a transaction, investment or activity.
Non-discretionary clients may have different rights in the same investment. For
example, a private investment (or possibly redemption) on behalf of a discretionary
client may prevent the investment into a fund (or redemption out of a fund) of a non-
discretionary client.
Different divisions within Wilshire may have different approaches to managers,
portfolios, funds or other investment products. Some divisions may favor, and some
client portfolios may be better suited for, more active management based on
investment ideas derived from short-term market views (“dynamic tilts”). The use of
dynamic tilts may affect (positively or negatively) the volatility and expenses of
implementing an investment strategy or portfolio and further cause differences
between clients.
Greater detail regarding the advisory services provided by Wilshire’s business units
are as follows:
WILSHIRE CONSULTING
Wilshire Consulting provides discretionary and non-discretionary investment
solutions and services to public and private defined benefit and defined contribution
pension funds, endowments, foundations, healthcare organizations, insurance
companies and sovereign wealth funds. Wilshire Consulting assists clients in
developing and implementing an investment plan, including setting investment
objectives, engaging in manager selection and determining asset allocation, in-line
with the client's risk tolerance and return goals.
Wilshire Consulting applies a consistent philosophy to its advisory services, believing
that industry research and our over 35 years of experience indicate that asset
allocation has the greatest impact on a portfolio’s long-term risk and return profile.
Wilshire’s extensive toolkit of proprietary technology and research provide practical
solutions that clients can easily and effectively implement. Wilshire Consulting
monitors both the plan and the performance of each underlying manager to evaluate
the client’s success in obtaining its investment objectives.
Clients are provided regular reports, detailing Wilshire’s assessment, and access to
Wilshire’s qualitative and quantitative software tools to assist in developing and
implementing investment objectives.
Outsourced Chief Investment Officer (OCIO) Solutions
Wilshire Consulting provides discretionary services to clients who wish to outsource
their investment process in full or in part. Wilshire’s discretionary solutions provide all
of the services of Wilshire’s non-discretionary consulting practice and assume the
decision-making authority to hire and fire investment managers as well as implement
asset allocation and manager transition strategies in accordance with the investment
policy. The service is provided on a customized basis or in a commingled solution as
described below.
The Wilshire Solutions Funds Trust
Wilshire Consulting serves as the investment manager to the Wilshire Solutions
Funds Trust (“WST”), a pooled investment vehicle consisting of a series of funds.
WST is a commingled investment platform offered to clients who seek a pre-
packaged solution to access Wilshire Consulting’s discretionary services. A complete
description can be found in WST’s offering documents.
Actuarial Consulting
Wilshire’s actuarial consulting practice provides traditional actuarial services to
defined benefit and defined contribution plan sponsors. These services include
funding and accounting actuarial valuations, benefit administration and strategic
consulting. Wilshire’s actuarial team works closely with their investment consulting
counterparts to assist plan sponsors to develop and manage their plan policies.
Wilshire Compass
Wilshire Consulting manages Wilshire Compass, an analytical tool that combines a
comprehensive database with proprietary technology to develop and maintain a
complete and disciplined investment plan. Wilshire Compass helps its users to:
• Formulate investment policy and implement strategies
• Monitor and evaluate asset class and total fund performance and risk
• Develop asset allocation and rebalancing recommendations
• Select and evaluate investment managers
• Analyze and optimize manager teams
WILSHIRE PRIVATE MARKETS
Wilshire Private Markets provides its clients discretionary and non-discretionary
private equity and real asset investment solutions and services. WPM delivers its
services and solutions through i) commingled funds (funds of funds) managed by
WPM; ii) customized separately managed accounts; and iii) advisory services.
Discretionary solutions may be comprised of primary partnership investments,
purchases of LP interests in a secondary market, and direct or indirect co-
investments alongside private equity fund managers in individual assets and/or
securities. Non-discretionary advisory solutions may be comprised of private capital
program design, strategy development, investment sourcing, due diligence,
monitoring and reporting of private equity fund managers and partnerships for
institutional investors. WPM’s senior investment professionals execute both
diversified and focused investment mandates from four offices in the United States,
Europe and Asia, providing a comprehensive approach to the private equity needs of
its clients.
WPM monitors private markets investments on behalf of its clients and limited
partners. Monitoring activity may involve on-site and telephonic portfolio updates,
annual meeting attendance, review of amendments to limited partnership
agreements, monitoring of investment pace, capital call schedule and distributions,
and ensuring funds adhere to stated investment mandates. In many cases WPM will
request and take seats on fund LP advisory boards. WPM utilizes a proprietary
investment database to track the status of underlying investments in each
partnership. A formal quantitative analysis of relative fund performance is reviewed
by the WPM Investment Committee quarterly. Regional teams, including members of
the WPM Investment Committee, meet semi-annually to conduct a formal review of a
material portion of the overall portfolio.
WILSHIRE FUNDS MANAGEMENT Investment Advisory Services
Wilshire Funds Management offers discretionary and non-discretionary investment
advisory services to financial institutions and intermediaries, commingled funds and
mutual fund complexes. WFM’s clients include insurance companies, broker-dealers,
banks, retirement plan service providers, investment managers and family offices.
Services include outcome-oriented asset allocation and manager selection services
(ranging from advising on existing asset allocation programs or manager platforms to
full-scale implementation of multi-asset class, multi-manager investment programs),
providing asset allocation model portfolios, sub-advisory services, and ERISA 3(21)
and 3(38) fiduciary services with respect to fund lineups for retirement accounts
delivered through plan providers.
Wilshire Mutual Funds
WFM provides discretionary investment management services to Wilshire Mutual
Funds, Inc. and Wilshire Variable Insurance Trust (collectively, the “Funds”). These
services include the management of asset class specific multi-manager funds and a
global fund. In all cases, WFM either selects investment managers as sub-advisors
to manage the investment portfolios of the Funds, or invests in other registered
investment companies utilizing a fund of funds approach.
Sub-Advisory Services
WFM serves as discretionary and non-discretionary sub-advisor to a number of
registered investment companies and private funds sponsored and/or managed by
third parties. WFM’s role with respect to each such fund is dictated in each case by
the authority given to WFM by the sponsor/investment manager of each such fund.
Hedge Fund Advisory, Risk Premia, Liquid Alternatives and Managed Account
Services
WFM offers hedge fund manager and risk premia strategy research, selection and
advisory services to its clients, as well as research and advisory services for
registered investment companies categorized as liquid alternative strategies. WFM
also operates hedge fund managed account platforms as a turn-key alternative
investment management solution open to qualified investors. The platforms provide
investors the opportunity to allocate capital across one or more segregated
portfolios, each with a unique investment strategy and profile. The platforms offer
clients a customizable means to access alternative investments with enhanced
transparency and liquidity. Investors in third-party feeder vehicles are not deemed to
be Wilshire “clients” under the Investment Advisers Act of 1940 (the “Investment
Advisers Act”), but are entitled to the rights and benefits described in the applicable
disclosure documents, management agreements, limited liability company
agreements and other applicable constituent documents.
Wilshire and Mizuho Alternative Investments, LLC (“MAI”) maintain a shared
database (the “Database”) of investable risk premia index products by banks (“Bank
Risk Premia Strategies”); and develop products and services utilizing the Database
both together and independently. Wilshire shares with MAI a percentage of its
revenues derived from Bank Risk Premia Strategies utilized on Wilshire Institutional
Master Fund II SPC where MAI is not retained as the sub-advisor with respect to
such strategies. Wilshire and MAI also share revenues where one of the two are
engaged to provide advisory services or products involving Bank Risk Premia
Strategies to a third party and engages the other to provide support or services with
respect to such engagement.
Wilshire Advisor Solutions
Wilshire Advisor Solutions (“WAS”) is WFM’s branded solution to financial advisors.
WAS provides financial advisors with a turnkey way of accessing Wilshire’s expertise
in asset allocation, manager selection and portfolio construction primarily using
Wilshire’s mutual funds and/or mutual fund/ETF based model portfolios. The
managed portfolios are generally organized around the following themes:
• Wilshire Asset Allocation Portfolios – several distinct series of portfolios which
seek to provide broad diversification across asset classes and investment
managers. These portfolios contain a range of risk/return profiles designed to
suit the individual risk tolerance levels of financial advisors’ clients.
• Wilshire Diversified Alternatives Portfolio – seeks to provide diversified
exposure to a range of liquid alternative strategies and investment managers
• Wilshire Active Income Portfolios – seek to provide exposure to a range of
fixed income asset classes and investment managers, while generating an
attractive risk-adjusted yield as well as total return.
The WAS team markets these managed portfolios directly to independent broker-
dealers, RIAs, multi-family offices and wealth management platforms.
Tailored Relationships
Investment goals, objectives and/or guidelines for each advisory client are
documented in each client agreement. Clients may impose restrictions on investing
in certain securities or types of securities. Advisory agreements may not be amended
or assigned without client consent.
Client Agreements
Prior to the start of any client relationship, Wilshire enters into an agreement with the
client. The agreement outlines the terms and conditions of the relationship including
a description of the services to be provided by Wilshire, responsibilities of the client,
fees as well as other standard contractual terms.
The following categories of agreements define our typical client relationships:
Discretionary Investment Management Agreement – Wilshire develops, manages
and monitors a client’s portfolio with full discretion to implement investment decisions
in accordance with an agreed upon investment policy detailing objectives, time frame
and acceptable risks. Wilshire takes a top down, macro approach, providing portfolio
construction for the client and hiring third party managers to construct asset
portfolios in line with Wilshire’s broad investment mandate.
Non-Discretionary Investment Consulting Agreement – Wilshire advises a client in
the development of an investment policy and assists in manager selection and
monitoring, performance monitoring and risk analysis.
License Agreement – This is used for clients who want to license Wilshire’s analytical
tools.
Relationships with clients that invest in Wilshire investment vehicles are regulated by
the governing documents of the investment vehicles. Wilshire may also enter into an
agreement with clients for unique, specified services.
Termination of Agreements Generally, after an agreed upon initial term, an advisory client of Wilshire may
terminate an agreement with ninety (90) days prior written notice. At termination,
fees will typically be billed on a pro rata basis for services provided and Wilshire will
refund any unearned portion of paid fees. Alternative termination terms may apply in
private markets separately managed accounts and co-mingled closed-end funds.
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Description of Clients Wilshire primarily provides investment advisory services to institutional investors
such as pension and profit-sharing plans, trusts, estates, charitable organizations
and corporations, and to retirement plans, individual retirement investors and retail
investors through financial intermediaries such as recordkeepers, broker-dealers,
investment advisors and insurance companies. Wilshire may also provide investment
services to U.S. or foreign government entities, state or municipal government
entities, public international organizations, investment limited partnerships, and other
types of investment vehicles.
Client relationships vary in scope and length of service. Minimum account size can
also vary across products. Generally, the minimum account size for institutions will
range from $1,000,000 to $50,000,000 and for retail investors will vary with Wilshire’s
relationship with the financial intermediary. In certain situations, Wilshire will accept a
startup fund or product with zero assets. In those cases, a minimum fee may be
negotiated.
Fees Generally
Wilshire’s advisory fees differ depending on the size of the client, services provided,
complexity of the solution and the relationship established. Fees may include i) a
fixed fee; ii) a percentage of assets under management or advisement; iii) a usage
fee for a particular service (e.g., a license fee for analytical tools); and iv) a
performance fee.
Wilshire, in its sole discretion, may waive any minimum fee requirements and/or
charge a lesser investment advisory fee based upon certain criteria (e.g., historical
relationship, type of assets, anticipated future earning capacity, anticipated future
additional assets, dollar amounts of assets to be managed, related accounts,
account composition, negotiations with clients, etc.). All advisory fees are negotiable.
Advisory Fee Schedule by Division WILSHIRE ANALYTICS Wilshire Custom Indexes
Wilshire may receive either a fixed fee or 1 to 25 basis points on assets under
management services to clients engaging Wilshire’s index expertise. Fees are
commensurate with the services provided.
Wilshire Index Products
Wilshire may receive from 1 to 25 basis points on assets under management for
products developed from Wilshire’s indexes.
WILSHIRE CONSULTING Non-discretionary advisory services
Wilshire typically receives an annual fixed retainer fee between $35,000 and $4
million for general non-discretionary advisory services.
Discretionary advisory services
Wilshire typically receives from 10 to 65 basis points on assets under management
for general discretionary advisory services.
Actuarial services
Wilshire typically receives from $10,000 to $500,000 for actuarial services.
Life-cycle or targeted retirement date investment programs
Wilshire typically receives from 5 to 25 basis points on assets under management for
life-cycle or targeted retirement date investment programs.
Risk Management
Wilshire typically receives an annual fixed fee between $250,000 and $3 million for
full service risk management consulting that delivers the risk measurement and
monitoring tools required to implement a risk management program.
Investment Management
For serving as investment manager to the WST, Wilshire Consulting receives a fee
on assets under management as agreed to between Wilshire and the investor,
subject to a minimum annual fee of $100,000 per investor. The minimum fee may be
waived in Wilshire’s sole discretion.
Wilshire Compass
Wilshire Consulting charges a fixed retainer fee annually for the use of Wilshire
Compass. Clients are billed monthly in arrears. Additional costs may be incurred,
depending on the number of users to be supported at each client site and/or on other
factors.
PRIVATE MARKETS
Separate account management
Private Markets generally charges a management fee of between 50 and 100 basis
points on committed or invested capital for separate accounts. Management fees are
generally calculated and billed quarterly in advance. Certain additional services may
also be contracted and charged on a fee-for-service basis. The minimum capital
commitment under management for a separate account is generally $25,000,000,
which amount may be reduced in Wilshire’s sole discretion.
Fund of funds
Private Markets serves as the investment manager to pooled investment vehicles,
whose limited partners are charged a management fee based on the value of
committed capital or invested capital and may charge a performance fee. Fees vary
and are as disclosed in the offering documents for each investment vehicle.
Commingled vehicles generally require a minimum investment of $5,000,000, which
amount may be reduced in Wilshire’s sole discretion.
Non-discretionary advisory services
Private Markets may charge a project-based fee, an annual fixed retainer fee or a fee
based on a percentage of assets under management for non-discretionary advisory
services.
WILSHIRE FUNDS MANAGEMENT
Wilshire Funds Management charges both fixed retainer and asset based fees for
advisory services. WFM’s fixed retainer fees typically range from $100,000 to $5
million, depending upon the type of advisory services provided. WFM’s asset based
fees typically range from 5 to 50 basis points for multi-asset advisory services,
offered either under a non-discretionary or discretionary mandate. Fees for custom
hedge fund of fund strategies, including risk premia, range from 30 to 120 basis
points and in certain instances includes a performance fee of up to 20%. Fees
charged for access to hedge fund strategies on the Wilshire Managed Account
Platform range from 25 to 75 basis points. Wilshire shares with MAI a percentage of
its revenues derived from Bank Risk Premia Strategies utilized on the Wilshire
Institutional Master Fund II SPC. Wilshire and MAI may share a percentage of
revenues from products or advisory engagements derived from the use of the joint
intellectual property contained in the Database (a shared database of investable risk
premia index products offered by banks).
Fees charged for the management of Wilshire Mutual Funds, Inc. and Wilshire
Variable Insurance Trust vary by fund and range from 10 to 60 basis points. Details
can be found in each Fund’s Prospectus and Statement of Additional Information.
Fees charged for WAS range from 15-50 bps. Generally, WAS portfolios that include
Wilshire Mutual Funds have a zero fee option.
CUSTOM SERVICES
Wilshire will provide specified services for special projects upon request. In such
cases, Wilshire provides the prospective client a proposal letter that outlines the
scope of the project and the applicable fee. Generally, such projects are of short
duration and fees are payable as agreed upon with the client.
Fee Billing Fees are generally billed monthly or quarterly. Payment in full is expected upon
receipt of the invoice.
Fees may be paid out of the client’s investment account by the client’s custodian. A
client must consent in advance to direct debiting of its investment account. When we
collect fees in this manner, at the same time we bill the custodian, we will send the
client an invoice showing the amount of the fees, the value of the assets on which
they are based, and the fee computation. Upon termination, fees will be billed or
refunded, as appropriate, on a pro rata basis for the portion of the quarter completed.
The portfolio value at the beginning of the period is used as the basis for the fee
computation, adjusted for the number of days during the billing quarter prior to
termination.
Other Fees Client accounts may incur other fees not associated with Wilshire (e.g.,
administrative, custodian and/or transaction fees). Client accounts also incur
brokerage commissions, which are discussed in the “Brokerage Practices” section of
this brochure. Expenses other than advisory and performance fees and brokerage
commissions, such as custody fees, are generally paid directly by a client to the
service provider.
Funds are generally subject to operating expenses, including advisory fees paid to
the investment managers and sub-advisors of the funds. If Wilshire invests a client’s
assets in a fund (proprietary or nonproprietary), the client will bear a proportionate
share of the operating expenses of the fund; in addition to the fees it pays Wilshire.
If Wilshire invests a discretionary client’s assets in a fund managed by Wilshire,
Wilshire will generally waive its advisory fee with respect to those assets; however,
Wilshire, as the investment adviser to the fund, will receive a management fee
directly from the fund.
Performance Based Fees
Wilshire may charge a performance fee for certain services to its clients qualified to
participate in performance fee arrangements under the Investment Advisers Act.
These fees are generally charged on a percentage of the profits earned from
investments, at times only after a minimum return has been achieved. The pertinent
fee agreement provides details about how these fees are charged.
The use of performance-based fees may result in conflicts of interest. Advisors may
devote more time to developing and analyzing investment strategies or allocate
opportunities preferentially to accounts for which it could share in investment gains.
Wilshire professionals allocate client assets according to our policies. Therefore,
accounts with performance-based fees are not granted preferential allocations and
no client, regardless of fee model, is favored over another.
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of Loss Methods of Analysis Since 1972, Wilshire has pioneered analytical-driven investment consulting and
asset management solutions to manage risk. Wilshire was an early innovator of
integrated asset/liability modeling, as well as risk management and portfolio
optimization models to help plan sponsors and institutional investors arrive at optimal
portfolios based on their specific needs. Industry research and our experience lead
us to believe that the asset allocation decision has the greatest impact on a
portfolio's long-term return and risk profile. Wilshire embraced this important concept
over 35 years ago when the firm introduced its integrated asset/liability modeling
technique to the industry.
The investment strategy for a specific client is based upon the objectives stated by
the client during consultations and as mutually agreed through an investment policy
statement. Wilshire has over 35 years of experience in assisting clients to develop
investment policies, procedures and guidelines. Investment policy and guidelines are
integral to all aspects of Wilshire's investment advisory services.
For those clients for which Wilshire has investment discretion, Wilshire primarily
selects asset managers as sub-advisors to whom Wilshire delegates day-to-day
portfolio management or invests in other investment funds, which it monitors and
oversees. These investment managers or funds execute various types of investment
strategies. Wilshire’s selection and monitoring of investment managers is based on
various criteria, including, without limitation, investment performance, risk
management, investment philosophy, organizational structure, experience and
commitment.
Wilshire also engages in quantitative, rules-based investment analytics, which are used in a
variety of applications including monitoring broker-dealers’ investment platforms and selecting
securities for investment portfolios.
Risk of Loss
All investment programs have certain risks that are borne by the investor. Wilshire’s
investment approach seeks to mitigate risk and ensure clients are compensated for
the risk they take. The risk for each client varies in accordance with their policies,
procedures, goals, guidelines and stated risk tolerance. In addition, all of Wilshire’s
clients will encounter risks, including, but not limited to:
Market Risk: The price of a security, bond, or mutual fund may drop in reaction to
tangible and intangible events and conditions. This type of risk is caused by external
factors independent of a security’s particular underlying value or the company’s
circumstances. For example, political, economic and social conditions may trigger
market events.
Interest-rate Risk: Fluctuations in interest rates may cause investment prices to
fluctuate. For example, when interest rates rise, yields on existing bonds become
less attractive, causing their market values to decline.
Inflation Risk: When any type of inflation is present, a dollar today will not buy as
much as a dollar next year, because purchasing power is eroding at the rate of
inflation.
Currency Risk: Foreign investments are subject to fluctuations in the value of the
dollar against the currency of the investment’s originating country. This is also
referred to as exchange rate risk.
Reinvestment Risk: Future proceeds from investments may have to be reinvested at
a potentially lower rate of return (i.e., interest rate). This risk primarily relates to fixed
income securities.
Business Risk: These risks are associated with a particular industry or a particular
company within an industry. For example, oil companies are subject to the vagaries
of both broadly fluctuating demand, and accordingly, prices for their product. They
carry a higher degree of risk of loss in comparison to an electric company, which has
a more predictable demand for its product at a regulated price.
Liquidity Risk: Liquidity is the ability to readily convert an investment into cash.
Generally, assets are more liquid if many traders are interested in a standardized
product. For example, Treasury Bills are highly liquid, while real estate properties
are not, given the lengthy process to sell real estate.
Financial Risk: Financial risk represents a broad spectrum of risk associated with a
company’s financings, including loans and the risk of default.
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Legal and Disciplinary Registered investment advisers are required to disclose all material facts regarding
any legal or disciplinary events that would be material to a client’s evaluation of the
adviser or the integrity of the adviser’s management. While Wilshire may be engaged
in various civil litigation matters from time to time, to the best of Wilshire’s knowledge
there is no current or pending litigation against Wilshire that would affect its ability to
fulfill contractual commitments. Wilshire has no reportable legal or disciplinary
events.
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Wilshire acts in the capacity of investment adviser to the Wilshire Mutual Funds, Inc.
and the Wilshire Variable Insurance Trust. In addition, certain personnel of Wilshire
serve as officers and/or directors of Wilshire Mutual Funds, Inc. and the Wilshire
Variable Insurance Trust.
Wilshire is registered as a Commodity Pool Operator and Commodity Trading
Adviser with the National Futures Association and certain Wilshire employees have
been registered as Associated Persons. Certain Wilshire employees are also
registered representatives with Foreside Financial Group, LLC, a registered broker-
dealer.
Affiliations
Operations in Amsterdam and Hong Kong, are conducted through affiliated
companies, Wilshire Associates Europe B.V. (“WAEBV”) and Wilshire Hong Kong
Limited (“WHKL”). Wilshire Private Market’s participation as general partner in
various offshore limited partnership investment vehicles is conducted through entities
controlled by Wilshire’s affiliate, Wilshire Global Advisors Inc. Wilshire organized
these affiliated entities to comply with local laws.
WAEBV in the Netherlands distributes Wilshire products and services and provides
research and advisory support for Wilshire’s business in Europe. Members of WPM
who are employees of WAEBV are involved in the due diligence and ongoing
monitoring of WPM investments and certain WAEBV employees are members of the
WPM Investment Committee.
WHKL provides research support for WPM’s private markets business. Employees
of WHKL are involved in the due diligence and ongoing monitoring of WPM’s
investments and certain WHKL employees are members of the WPM Investment
Committee.
Private Markets also maintains a legal presence in Australia through its affiliate
Wilshire Australia Pty Limited (“WAPL”). WAPL, which wholly owns Wilshire Global
Advisors Limited (“WGAL”), has a financial services license under Australian law.
Conflicts of Interest Conflicts of Interest A conflict of interest exists when circumstances create a risk that Wilshire’s
professional judgment or actions will be unduly influenced by a secondary interest.
More specifically, and without limitation, conflicts of interest may arise when Wilshire
is in a position to: i) provide advice or a recommendation to a client with regards to
Wilshire’s own products or services; ii) provide advice or a recommendation with
regards to a product or service with which Wilshire competes; iii) evaluate, review or
recommend an investment manager or other financial services provider with which
Wilshire has a business relationship or to which it provides services; or iv)
recommend the services of a third party from which Wilshire currently obtains a
benefit (economic or otherwise).
Wilshire has extensive business relationships with, and may provide services to,
investment managers and other financial services providers that may be evaluated or
recommended by us. Wilshire recognizes that there are potential conflicts of interest
between Wilshire's obligation to provide objective advice to clients and our
relationships with the investment managers and financial services providers we
recommend to those clients. Wilshire also provides products and services that may
compete with those that we evaluate or recommend. In addition, Wilshire Funds
Management and Wilshire Analytics are currently managed by a single individual.
Wilshire also receives differentiated fees or other compensation (including
performance-based fees) from clients and may have incentives to favor some clients
or accounts over others. Certain investors that are invested in pooled investment
vehicles may pay higher or lower fees and expenses or may be subject to higher or
lower incentive allocations than similarly situated investors that are invested in the
same pooled investment vehicle. Amounts may vary as a result of differentiated
factors that may include the particular circumstances of the investor or the size and
scope of the overall relationship. Fee and expense allocations to investors may differ
depending on the class of shares.
It is Wilshire’s policy to make evaluations, recommendations and decisions based
solely upon the best interests of the client and without regard to any benefit
(economic or otherwise) that Wilshire receives or might receive. Wilshire is
committed to ensuring that it does not consider an investment manager’s or financial
service provider’s business relationship with Wilshire, or lack thereof, in performing
evaluations for or making recommendations to its advisory clients. Wilshire has
implemented policies and procedures that seek to mitigate conflicts of interest
through appropriate oversight, transparency and controls.
Oversight Wilshire has charged the Wilshire Management Committee (WMC), made up of the
heads of the four divisions, the President, Chief Financial Officer, General Counsel
and Chief Compliance Officer, to identify and evaluate potential conflicts of interest,
develop and execute appropriate policies, and oversee conflicts of interest.
Where Wilshire proposes to provide information (i) to a current advisory client about
an investment in a fund or other investment vehicle for which Wilshire or one of its
affiliates is the investment manager, (ii) to a current advisory client about additional
discretionary services of another Wilshire business unit or (iii) to a new client that
may retain Wilshire to provide both investment advisory and discretionary investment
services (either through a separate account or a Wilshire vehicle), the WMC will
review such transaction and determine whether to disallow the additional services or
what additional actions if any may be prudent to mitigate the conflict.
Transparency Wilshire has an obligation to make full and fair disclosure of material facts to its
clients. A fact is considered to be material when there is a substantial likelihood that
a reasonable individual would consider it important or where knowledge of the
information would be necessary for the client to make an informed decision.
Wilshire’s policy is to disclose material conflicts of interest to its clients and
prospective clients. Wilshire will provide existing and prospective investment
advisory clients with a Conflicts Disclosure Report (“Disclosure Report”), listing all
relationships that Wilshire has with investment managers and other relevant financial
services providers along with a summary of the types of services that Wilshire may
provide to those entities. Wilshire also provides certain advisory clients with a
Disclosure Report when making a manager recommendation or when otherwise
deemed appropriate. Clients receiving a Disclosure Report may request more
detailed information about managers or service providers with which the client has or
is considering a relationship by contacting Compliance. For each manager or
financial services provider for which a client has requested additional information,
Wilshire will, where appropriate, provide a more detailed report.
When Wilshire recommends a Wilshire fund or other product to a client, Wilshire will
provide the client with relevant disclosures including identification of the potential
conflict of interest and the benefits (economic and otherwise) that Wilshire may
obtain from a client’s investment; and, when deemed necessary, the client will be
required to acknowledge and accept such conflict.
Controls An ethical wall is a process for mitigating conflicts of interest by limiting the
communication of information between individuals or groups, whether written or oral,
which may give rise to a conflict of interest. Where appropriate, Wilshire has
established ethical walls around business activities where sharing information may
create a conflict of interest. The ethical walls seek to prevent members of one group
from accessing information that may influence the service they provide to a client.
Code of Ethics, Participation or Interest in Client Transactions and Personal Trading Code of Ethics Wilshire’s Code of Ethics (“Code”) was adopted in compliance with the requirements
of the Investment Advisers Act and the Investment Company Act of 1940. The Code
emphasizes Wilshire’s fiduciary duty to its investment management and consulting
clients and the obligation of the firm’s personnel to uphold that fundamental duty.
The Code addresses securities-related conduct and focuses principally on personal
securities transactions, insider trading, outside activities, gifts, conflicts of interest,
political contributions and employee reporting requirements.
Wilshire has implemented Schwab Compliance Technologies to assist in the
management, monitoring and reviewing of employee personal securities accounts
and transactions. Employees, with limited exceptions, are required to maintain
accounts at approved broker-dealers and are required to obtain pre-approval prior to
trading securities listed on the firm’s Restricted Companies List (“RCL”). The RCL
includes all publicly traded companies that are clients of Wilshire’s advisory business
units (excluding Wilshire Compass clients), all individual securities being actively
held or traded by a portfolio over which Wilshire has discretionary control, or if
Wilshire believes it could be in possession of material nonpublic information about
such companies. Business unit managers, in consultation with Wilshire’s
Compliance Department, determine whether or not to include companies on the
RCL.
On an annual basis Wilshire requires all employees to certify that they are in
compliance with the Code. Wilshire will provide clients and prospective clients with a
copy of the Code upon request.
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Selecting Brokerage Firms Wilshire does not have any affiliation with firms that sell products (i.e., broker-
dealers). Select employees of Wilshire who engage in activity that may require their
registration as a licensed agent of a broker-dealer are affiliated with a brokerage firm,
through which Wilshire distributes investment products. Wilshire does not otherwise
regularly execute or direct trading on individual securities and Wilshire does not
generally make recommendations to clients regarding brokerage services.
Best Execution
On occasion, Wilshire may execute transactions through a broker-dealer on behalf of
Wilshire managed funds or empower an agent to trade on behalf of Wilshire
managed funds. When directly selecting a broker-dealer Wilshire will seek to have
orders executed at prices that are as favorable as possible under prevailing market
conditions. Wilshire will seek broker-dealers that can provide the best qualitative
execution, taking into consideration various factors, including, but not limited to the
asset being traded, the capability of the firm to execute trades efficiently, quality of
price execution, the competitiveness of commission rates and transaction fees,
Wilshire’s limited trading activity, and the overall level of customer service. Thus,
while Wilshire will give significant weight to the competitiveness of the available
commission and transaction rates, it may not necessarily select the broker-dealer
that offers the lowest possible rates. Additionally, even where Wilshire uses its best
efforts to seek the lowest possible commission rate, it may not obtain the lowest rate
for any particular transaction.
If a client directs Wilshire to effect transactions through a particular broker-dealer,
Wilshire may not be able to seek best execution services or prices from such
directed broker-dealers nor may it be able to “bunch” the client’s transactions with
orders for other accounts. As such, the client may incur higher commissions or other
transaction costs than would otherwise be the case had the client determined to
effect transactions through the brokerage relationships generally recommended by
the advisory firm.
With respect to Wilshire client assets that are managed by a third-party investment
manager, the investment manager has a fiduciary obligation to seek best execution
for all transactions executed on behalf of the client in accordance with its own
policies and procedures.
Soft Dollars Wilshire does not have any soft dollar arrangements. Wilshire does receive payment
from third parties for analytic services as a result of soft dollar arrangements by our
clients.
Order Aggregation Wilshire does not regularly execute transactions for multiple clients with a broker-
dealer. Were it to arise, Wilshire may aggregate transactions if it were unlikely that
aggregation would work to the disadvantage of any client whose order is to be
aggregated. However, it is possible that the effect of aggregation may work to a
clients’ disadvantage in relation to a particular order.
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Periodic Reviews Each business unit performs periodic account reviews, as appropriate, when market
conditions dictate or as agreed upon with the client. Client account reviews involve
various Wilshire personnel and may include portfolio managers, consultants and
members of our manager research team.
Review Triggers
Other conditions that may trigger a review are changes in applicable tax laws, new
investment information, and/or changes in a client’s situation.
Regular Reports Clients receive periodic communications on at least a quarterly basis. The updates
may include a valuation statement, portfolio statement, fact sheets, and/or market
commentary.
Client Referrals Wilshire engaged Morgan Stanley Japan Securities Co., Limited ("MSJ") to assist
Wilshire's marketing efforts with respect to the Wilshire Private Markets Japan Unit
Trust (the “Japan Fund”). The Japan Fund is a feeder vehicle through which
Japanese investors may invest in Wilshire managed pooled investment vehicles.
The Japan Fund has invested in Wilshire Private Markets Japan Master Fund II, Ltd.
(“Fund II”) and Wilshire Private Markets Japan Master Fund III, Ltd. (“Fund III”).
Fund I and Fund II have invested in Wilshire Private Markets Japan Master Fund I,
L.P. and Wilshire Private Markets Japan Master Fund II, L.P., respectively. Fund III
has invested in each of Wilshire Asia Private Markets Fund VII, L.P., Wilshire
European Private Markets Fund VII, L.P. and Wilshire U.S. Private Markets Fund VII,
L.P. Wilshire will pay MSJ a subscription fee equal to 1% of the commitment amount
of the Japanese investors in the Japan Fund. In addition, Wilshire will pay MSJ
23.08% of the annual management fee paid to Wilshire by Wilshire Private Markets
Japan Master Fund I, L.P. and Wilshire Private Markets Japan Master Fund II, L.P.,
and 30.77% of the annual management fee paid to Wilshire by each of Wilshire Asia
Private Markets Fund VII, L.P., Wilshire European Private Markets Fund VII, L.P. and
Wilshire U.S. Private Markets Fund VII, L.P. with respect to investments in such
funds by the Japan Fund. In addition, Wilshire pays MSJ an amount equal to 100%
of the first two years of annual management fees paid to Wilshire for the investment
into Wilshire Asia Private Markets Fund VIII (Offshore), L.P. by certain Japanese
investors.
WPM investors in the Japan Fund are subject to the same management fees and
carried interest. Investors introduced by MSJ are charged a subscription fee.
Notwithstanding the foregoing, certain funds established by Wilshire with investment
strategies substantially identical to the Japan Fund do not require the payment of a
carried interest or a subscription fee and have fees and expenses which could be
substantially lower than those of the Japan Fund.
Wilshire has engaged TopCap Partners, Inc. to refer potential prospects to Wilshire
Private Markets, primarily in European markets. Wilshire will pay TopCap Partners,
Inc. fees in accordance with out agreement. Clients referred by TopCap Partners,
Inc. will pay no additional fees for substantially similar services provided by Wilshire.
Wilshire has engaged Moravia Capital AG to refer potential prospects to Wilshire
Private Markets, primarily in European markets, all of whom are required to be non-
U.S. citizens or residents. Wilshire will pay Moravia Capital AG fees in accordance
with out agreement. Clients referred by Moravia Capital AG will pay no additional
fees for substantially similar services provided by Wilshire.
The Wilshire Institutional Master Fund II SPC (“MAP”) has engaged MCP Asset
Management (Japan), Inc. (“MCP”) as placement agent in Japan for the placement
of A-1 shares of certain segregated portfolios of MAP. MAP shall pay MCP out of the
A-1 share class of such segregated portfolios a fee equal to 0.05% per annum of the
daily NAV of the class A-1 shares of such segregated portfolios and an additional fee
equal to JPY 10,000 per Foreign Exchange and Foreign Trade Act Filing. Other
share classes of such segregated portfolios of MAP will not pay the associated fees
for substantially the same interest in such segregated portfolios.
Wilshire Institutional Master Fund II SPC has engaged Mizuho Securities Co., Ltd., a
member of Mizuho Financial Group, and an affiliate of a Sub-Advisor on MAP, as
placement agent in Japan for the A-1 and A-2 share classes of certain segregated
portfolios of MAP. MAP shall pay MS out of the A-1 Share Class of such segregated
portfolios a fee equal to 0.05% per annum of the daily NAV of the class A-1 shares.
MAP shall pay MS fees as agreed upon on a case by case basis for placement of the
A-2 share class of certain segregated portfolios of MAP. Prospective investors in the
A-2 shares class will be informed of the applicable fee prior to an initial investment
shares. Other share classes of such segregated portfolios of MAP will not pay the
associated fees for substantially the same interest in such segregated portfolios.
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Private Investment Funds Wilshire is deemed to have custody of the assets held by private investment funds
for which Wilshire serves as general partner or managing member. With respect to
the assets held by these funds, Wilshire takes the following steps: 1) all assets held
by the funds are held by qualified custodians; 2) the funds are audited annually by a
member of the Public Company Accounting Oversight Board; 3) either Wilshire or the
applicable custodian sends, not less than quarterly, statements to all investors in a
fund; and 4) audited financial statements prepared in accordance with "generally
accepted accounting principles" will be distributed to all investors in a fund within 120
days (180 days for a fund of funds) of the end of each fiscal year.
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Discretionary Authority
Wilshire provides investment discretionary services and accepts discretionary
authority to manage assets on behalf of clients, as more fully detailed above under
Types of Advisory Services. Wilshire’s discretionary authority on behalf of a client
will be as detailed in the client’s investment advisory agreement, including any
investment restrictions.
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Proxy Votes
Non-discretionary clients are expected to vote their own proxies unless they delegate
this responsibility to the applicable investment manager. Wilshire may have
responsibility for voting proxies for discretionary clients and where a client has
designated Wilshire such responsibility. In those instances, Wilshire will act prudently
and in the best interest of its clients, in accordance with our policies.
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Financial Condition Wilshire does not have any financial impairment that will preclude the firm from
meeting contractual commitments to clients.
Information Security Program Information Security Wilshire maintains an information security program to reduce the risk that personal
and confidential information may be breached.
Business Continuity Plan General Wilshire has a Business Continuity Plan in place that provides detailed steps to
mitigate and recover from the loss of office space, communications, services or key
people.
Disasters The Business Continuity Plan covers natural disasters such as pandemics,
earthquakes, snow storms, hurricanes, tornados, and flooding. The Plan covers
man-made disasters such as loss of electrical power, loss of water pressure, fire,
bomb threat, nuclear emergency, chemical event, biological event, T-1
communications line outage, Internet outage, railway accident and aircraft accident.
Electronic files are backed up daily and archived offsite.
Alternate Offices Alternate offices are identified to support ongoing operations in the event the main
office is unavailable. It is our intention to contact all clients, within a reasonable
timeframe, of a disaster that dictates moving our office to an alternate location.
Privacy Notice Privacy Notice Wilshire considers customer privacy to be a fundamental aspect of our client
relationships. Wilshire is committed to maintaining the confidentiality, integrity, and
security of our current, prospective and former clients' personal information. In the
course of providing clients with products and services, Wilshire may collect, retain,
and use client information for the purpose of administering our operations, providing
client service, and complying with legal and regulatory requirements. This
information may come from sources such as account applications, investment policy
statements, electronic or verbal correspondence, from your transactions, from your
brokerage or financial advisory firm, or from your financial adviser or consultant.
Wilshire does not sell, exchange or disclose client information with outside
organizations unless the third party is essential in administering our operations, or
except as required or permitted by law. As is common in the industry, non-affiliated
companies may from time to time be used to provide certain services, such as
preparing and mailing prospectuses, reports, account statements and other
information. These companies may have access to a client’s personal and account
information, but are permitted to use the information solely to provide the specific
service or as otherwise permitted by law. Wilshire may also provide personal and
account information of a client to the client’s brokerage or financial advisory firm
and/or the financial adviser or consultant.
Wilshire reserves the right to disclose or report personal information where we
believe in good faith that disclosure is required either under law or to cooperate with
regulators or law enforcement authorities. In addition, Wilshire may disclose
information about a client or the client’s account to a non-affiliated third party at the
client’s written request. Wilshire takes seriously the obligation to safeguard client
non-public personal information. Wilshire maintains appropriate safeguards
regarding client information which includes the use of security procedures to prevent
revealing client information.
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