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 April 2015

The Appian Fund returned 1.29% in April as quantitative strategies struggled during the month. Low volatility and the stalling of the U.S. Dollar rally were the primary culprits. As a reminder, we substantially reallocated the Fund’s portfolio as of May 1st, exiting two managers and replacing them with two managers new to the Wilshire Managed Account Platform.

Economic and Financial Market Overview

U.S. Equity indices reached new all time-highs in April before retracting at month’s end. In particular, the technologyheavy Nasdaq index finally reached its pre-“tech wreck” record price set in March of 2000. Oil prices surged 25% in April from $47.72/Barrel (WTI) to $59.62, with a corresponding increase in the share price of many energy companies. Macroeconomic news for the month was generally negative: employment growth slowed dramatically in March; Q1 GDP growth was reported at 0.2%; the strong U.S. Dollar weighed on multinationals; and investors were concerned about Q1 earnings reports. As the month progressed, those earnings reports came in at or above expectation, and investors bid up shares to close out April with a small gain in most U.S. Equity indices.

Appian Fund Performance and Positioning

The stalling of the U.S. Dollar rally in April was troublesome for two of the Fund’s quantitative managers in particular. From June 2014 to the end of March 2015, the dollar gained 18.6% against the Yen and 27.6% against the Euro. The move was caused in large part by divergent economic prospects for the U.S. relative to other major economies. Within this same period the International Monetary Fund’s (“IMF”) projections for U.S. GDP Growth were raised from 1.7% to 2.4% for 2014 and from 3.0% to 3.6% for 2015. In contrast, the IMF lowered projections for developed economies (ex-U.S.) from 3.7% to 3.5% for 2014 and from 4.2% to 3.5% for 2015. This change in sentiment caused a flurry of interest in U.S. assets and largely accounts for the U.S. dollar rally.

The Fund’s Global Macro manager, which uses a trendfollowing strategy, has profited substantially from the rally, but experienced losses in April as the rally stalled. The April loss, while disconcerting, is what we would have expected for them given the nature of their strategy. Additionally, the Fund’s Tactical Currency manager also had a long-U.S. Dollar posturing of their portfolio and suffered a loss in April. U.S. Long Short Equity had a very disappointing month given the positive return in U.S. Equities. As of this writing, however, they had more than reversed the loss.

On the positive side of the ledger, the Fund’s largest position – Market Neutral European REIT delivered a solid month in April. European equity markets retreated in April, and volatility increased. Real Estate stocks, which tend to be highly correlated to equities fell 1.8% in April. Due not only to their market neutral positioning, but also to their tendency to run a portfolio with higher quality longs and low quality, highly levered shorts, they generated a profit in April. Market events that are supportive of their strategy tend to be “risk-off” moves because poorer quality REITs tend to sell off more so than higher quality, less levered REITs during times of market stress. “Flight to quality” market events tend to be profitable for their strategy and positioning; this was the case in April.

In our March commentary we introduced the concept of Risk Premia investing. This is a new and emerging category of alternative investing in which we have a keen interest. Wilshire has added a few Risk Premia funds to their platform, and we allocated to two of them as of May 1. In the interests of keeping everyone fully aware of what they are invested in through the Appian Fund, we would like to continue our discussion around these two managers.

The first manager, referred to as “Global Factor, RP” on the Fund’s Tear Sheet, represents 18% of the Appian Fund portfolio. The manager pursues a multi-strategy quantitative global macro investment approach. However, unlike the majority of Global Macro strategies, this fund is expected to perform well in lower volatility, more normalized markets. In that way it should serve as a good compliment to the Fund’s existing Global Macro strategies which are expected to perform well during times of market stress. Their portfolio is typically divided into three distinct model types: fundamental, carry and momentum. Frequent rebalancing to those 33% targets means that winning positions are trimmed and losing positions are recapitalized. Since it is expected to perform well in what we would refer to as a “normal” market, this manager serves as a suitable replacement for the Fund’s prior Event Driven manager, which was also expected to perform well in normal markets. A constant question we ask ourselves when allocating the Fund is: Who is going to make money during regular markets?

The second manager, referred to as “Global Momentum, RP” on the Tear Sheet, represents 11% of the Appian Fund portfolio. As with any Risk Premia manager, they endeavor to look through asset classes to their building blocks. In their case the building blocks that they specialize in are four distinct momentum- based strategies: Equities, Interest Rates, Currency and Commodity Momentum. They are not exposed to equities per se; they are exposed to Equity momentum. As a momentum manager they would be expected to perform well in trending markets – good or bad. In contrast to the Global Factor fund, this strategy will suffer in markets that are trading sideways or have a few surprises. That being the case, they add to the Appian Fund’s overall basket of managers that should be expected to outperform in a market selloff, with the added benefit of capturing upward market moves as well. For that reason we replaced the Fund’s Relative Value Arbitrage managers (a long volatility strategy) with this strategy.

As with other significant reallocations we have made in the Fund, we are likely to see how the managers perform throughout the summer and in a variety of market events and conditions. We have spent considerable time in evaluating these and other potential allocations and are comfortable that we have a portfolio of unique and diversified strategies. We acknowledge that recent performance has been poor, and both we and Wilshire have worked diligently to position the portfolio for success in a wide variety of markets.

Attribution for April is as follows:

Attribution by Strategy
Market Neutral 0.40%
Event Driven -0.01%
Relative Value Arbitrage -0.24%
Tactical Currency -0.37%
U.S. Long/Short Equity -0.44%
Global Macro -0.64%
Net Return -1.29%

We appreciate your interest in The Appian Fund and invite you to contact us at any time.

Please note that our Chicago office changed locations as of June 1. Our new address is: 300 South Wacker Drive,
Suite 2750, Chicago, Illinois 60606. All of our phone numbers remain the same.

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