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 December 2014

The Appian Fund returned 0.62% in December as four of the Fund’s six managers took advantage of increased volatility in equities, interest rates and commodities to produce gains. Broad markets finished roughly flat for the month, although the S&P 500 swung by 5% during December.

Economic and Financial Market Overview

Stocks closed out a strong year with a rocky final week as light trading volume magnified market movements. For the month of December, the Wilshire 5000 Total Market IndexSM finished virtually flat, down -0.05%, while the Barclays U.S. Aggregate Index was modestly positive, finishing up 0.09%. Emerging markets and developed international markets sustained losses as investors rotated out of cyclically sensitive sectors such as Energy and Materials due to reduced global growth expectations. The MSCI EAFE and the MSCI Emerging Markets Indexes delivered negative absolute performances that were magnified by currency effects, posting returns of -3.46% and -4.61% (USD) respectively.

The collapse of oil prices coupled with the strength of the U.S. dollar contributed to increased market volatility throughout the month, with the euro and the yen depreciating sharply against the U.S. dollar. The 10-year U.S. Treasury started the month at 2.22%, then dipped as low as 2.07% mid-month before closing out the year at 2.17%, its lowest month-end level in 19 months and 87 basis points below the year-end 2013 yield. High yield bonds struggled during the month and have significantly underperformed on the back of dropping oil prices, as the Barclays Capital High Yield Index returned -1.45% in December.

Volatility, as measured by VIX, increased to 23.67 in midmonth (from a month start of 13.3) and closed the month at 19.20. This uptick in volatility created opportunities for hedge fund managers to exploit, and the HFRI Fund of Funds Composite Index finished the month up 0.32%. Macro strategies continued to capitalize on trends in oil, commodities and currency, and the HFRI Macro (Total) Index finished the month up 0.75%, with systematic strategies performing particularly well. Within equity/hedge strategies, the HFRI EH: Sector–Technology/ Healthcare was the best performing sub-sector for both the month and year, returning 2.16% and 9.75% respectively as Information Technology and Health Care were among the best performing GICS sectors in 2014. Event driven strategies declined for the month and delivered modest returns for the year as many funds were heavily exposed to some notable deals that broke in 2014, leaving them with large realized losses. Despite a down December, relative value strategies as measured by the HFRI: Relative Value Index finished the year up 4.50%, marking the Index’s sixth consecutive year of positive performance.

Appian Fund Performance and Positioning

Quantitative and Volatility based strategies performed well during December, with all of the Fund’s gains coming from this bucket of managers. The Fund’s Relative Value Arbitrage (long volatility) strategy benefitted from high and sustained volatility in gold and emerging markets. The Fund’s Global Macro manager continued its string of strong performance with gains driven primarily by the commodity sector. Short positions in every sub sector of energy drove profits for the month.

Market Neutral also produced positive returns in December, as the steep oil price decline and consequent sub-investment grade jitters aided the manager’s strategy. This manager’s book tends to contain long positions in high quality (which by their nature may be lower yielding) European REITs with a short book containing more highly levered, lower asset quality REITs. As such, “flight to quality” events tend to be positive for the strategy. We recently met with the portfolio manager in our Chicago office, and he described that 2014’s “mediocre” year was due mainly to a “flight to junk” by yield-seeking investors. That said, this positioning reconfirms our conviction behind the manager. Not only do they manage a market neutral portfolio, but it is a book that is likely to outperform during a market selloff. We do not seek diversification for diversification’s sake in the management of the Appian Fund portfolio; we seek diversification when it’s needed most. And the Fund’s significant allocation to this manager is an example of that philosophy in action

Tactical Currency was also slightly positive for December as the Fund’s long U.S. dollar position benefitted on the back of a strong U.S. economic recovery and the end of Quantitative Easing. The Fund’s long Dollar and short Swedish krona were the manager’s two best performing positions in 2014.

Detractors for December were U.S. Long Short Equity and Event Driven.

The Fund maintains its strong bias towards quantitative and non-correlated strategies entering 2015. We believe a confluence of factors will contribute to a more volatile environment in 2015 than we have experienced in the past two years. The end of Quantitative Easing in the U.S., the prospect of multiple shooting wars globally, the correction in high yield credit that may be underway, the potential for Russia to drag Europe into recession with all its corresponding effects and an equity market that needs to support itself in absence of Federal Reserve stimulus are all factors that have led us to a strong bias towards non-correlated, long volatility and quantitative strategies. Should this scenario of higher volatility play out in 2015, we expect consistent positive performance from the Appian Fund.

Attribution for December is as follows:

Attribution by Strategy
Relative Value Arbitrage 0.32%
Global Macro 0.24%
Market Neutral 0.20%
Tactical Currency 0.00%
Event Driven -0.04%
U.S. Long/Short Equity -0.10%
Net Return 0.62%


We appreciate your interest in the Appian Fund and invite you to contact us with any questions.

Best Regards, The GHP Team

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