GHP Funds


SVP I, the debut fund for the firm, closed in December 2002 and invested with four highly successful leveraged buyout funds. SVP I is diversified by sector and geography.

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SVP II is a leveraged buyout fund of funds which closed in December 2006. SVP II represents a continuation of the successful strategy utilized by the predecessor fund, primarily investing with large, top tier LBO and growth equity firms. SVP II is diversified by sector and geography.

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SVP Real Estate I, LP ("SVP RE I"), closed in February 2008, is a private real estate fund of funds. As with SVP I & II, SVP RE I received allocations with historically successful, highly sought after underlying fund managers who pursue compelling investment strategies. The fund is diversified by sector (Office, Hotel, Industrial/Warehouse, Retail and Residential) and geography (U.S., Europe, and Asia/Pacific).

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The GHP Credit Opportunity Fund (“GHP COF”) is a fund of alternative credit and distressed debt funds that is being raised and invested to pursue two specific investment themes: (1) the de-leveraging of European Banks, and (2) the potential for a distressed cycle in U.S. High Yield Credit. GHP COF will pursue complex liquid and illiquid credit opportunities in the U.S. and Europe.

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GHP Library

Monthly Commentary November 2014

The Appian Fund returned 0.25% in November as four of the six underlying funds turned in positive months. Monday, November 3rd marked the onset of the Fund’s substantially reallocated portfolio, which we have positioned to better weather a potential increase in market volatility.

Economic and Financial Market Overview

Domestic equity markets were positive again in November as the Wilshire 5000 Total Market IndexSM returned 2.48%. Large caps outperformed small caps, growth outperformed value, and overall market volatility declined with the VIX ending the month at 13.33. Oil plunged more than 17% during the month, losing over 10% on the last trading day of November as increased supply and decreased demand have pressured prices below $70 a barrel. The ripple effects for global markets are becoming impactful as consumers are benefitting from declining gas prices, leaving them with increased cash flow for discretionary spending. Consumer Discretionary and Consumer Staples were the two best performing sectors for the month, returning 5.53% and 5.37% respectively; whereas the Energy sector sold off and finished the month down -9.10%. Currency markets in oil producing countries have been rattled, with the Russian ruble losing significant ground against the dollar during November and the MSCI Emerging Markets Index returning -1.06% for the month.

Depressed oil prices have reinforced expectations that inflation will remain low for the near term, and, in Germany, the CPI fell to 0.5 percent in November, the lowest level in nearly five years. As services and manufacturing data out of Europe remains weak, the ECB may consider more aggressive stimulus measures. The 10-year U.S. Treasury slid to 2.18% in November, though the yield significantly eclipsed that of other developed nations. In Germany, the 10-year bund dropped to a record low of 0.65%, while Japan’s two-year yield fell below zero for the first time ever. Additionally, the yield on France’s 10-year bonds slipped below 1% for the first time.

Fund Performance Review

Positive performers for November included Event Driven, Long Short Equity, Market Neutral and Relative Value Arbitrage. Event Driven – Special Situations and Tactical Currency suffered losses. Unfortunately, the loss by the Tactical Currency manager overwhelmed all profits. This loss was driven by the manager’s long Yen position – the Yen continued its downward move as the Bank of Japan increased monetary stimulus. As we will describe further below, there is a rout going on in Emerging Market (“EM”) currencies. You may be wondering if the Fund’s Tactical Currency manager has exposure to EM currencies–it does not. The manager has five required criteria that a currency must possess for it to be included in their portfolio: tight pricing, liquidity, data history, similar currency dynamics (i.e.–no currency controls or trading bands) and independent currency. Emerging Market currencies tend to fail one or more of those criteria. Interestingly, the Chinese Yuan fails all five.

Monday, November 3rd was the first trading day for the Appian Fund’s substantially rebalanced portfolio. Although the negative performance figure for November is disappointing, we are encouraged by the fact that four of the six underlying strategies were profitable for the month. Our conviction behind the current portfolio remains high. During the summer months we felt there were many areas for potential concern: complacency in the equity markets, the end of Quantitative Easing, a potential bubble in high yield credit, and two shooting wars going on. In response to these concerns we realigned the portfolio. In an effort to move the Fund further away from the broader markets, we implemented a heavier allocation to quantitative managers while moving away from fundamental strategies. Quantitative strategies (as we define them) are not dependent upon advancing broad markets to perform well and, in fact, often profit in periods of elevated volatility. Accordingly, as of November 3rd (and continuing today) the portfolio was approximately 75% exposed to a bucket of four quantitative managers and 25% exposed to two fundamental managers.

We will likely maintain this portfolio positioning for the next several months, especially considering recent market events, such as the plunging price of oil, which seem to have at least partially confirmed our concerns. Since the Appian Fund’s reallocation the global investment environment seems to have gotten worse – not better. In the face of a one-two punch of falling oil prices and western diplomatic and economic sanctions, the Russian ruble has lost half its value versus the dollar in 2014. In its most dramatic move the ruble fell by 19% overnight on Monday, December 15th. Other EM currencies are under similar pressure: the Brazilian Real, Mexican Peso, Turkish Lira, South African Rand and Indonesian Rupiah are all suffering from falling oil prices. A Bloomberg index tracking 20 of the most traded emerging-market currencies fell to its lowest since 2003 on December 15, and this has pundits wondering if a 1998- style EM Currency Crisis is upon us. The high yield bond market has shut itself off to B and CCC issuers, especially energy-related issuers. A data breach at Sony was attributed to North Korea and will likely become the most expensive data breach ever. These are interesting times for sure. In sum, we believe that the portfolio is well-positioned for not only these, but other prospective market events as well.

We do acknowledge that 2014 was a difficult year for the Appian Fund, and the return was far short of expectation. We are very disappointed with the result and have been working diligently in partnership with Wilshire to position the portfolio optimally for the environment we face. We will continue to devote our efforts towards managing the portfolio in accordance with its objectives and will communicate any relevant market or portfolio information to you. We appreciate your patience and invite you to contact us at any time for further explanation.

Attribution for November is as follows:

Attribution by Strategy
U.S. Long/Short Equity 0.43%
Relative Value Arbitrage 0.38%
Market Neutral 0.38%
Event Driven 0.12%
Event Driven – Special Situations -0.10%
Tactical Currency -1.46%
Net Return -0.25%

We wish you and your families a wonderful holiday season and a prosperous 2015.

Best Regards, The Granite Hall Team

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