The 20 Rising Stars of Hedge Funds 2008

Education: Purdue University (B.A. in Political Science); Stockholm University (M.B.A.); London Business School (Master of Research, Ph.D. candidate) Mentor: Randall Dillard, Partner and Chief Investment Officer, Liongate Capital Management Funk oversees research and quantitative risk management at Liongate Capital Management, which has grown from a family office managing $30 million in assets when he co-founded it in 2003 to $2.5 billion in assets today.“Bringing Liongate to the market in 2004, my two partners and I entered an already mature and saturated marketplace,” Funk said. “We faced the challenge of building a new fund of hedge fund model designed to comprise portfolios with a top-down macro view,as well as marrying sophisticated quantitative risk management with qualitative judgment in order to adapt our portfolio to an evolving market environment.” Acknowledging and fitting into the evolutionary process was necessary in a market where traditional fund of fund managers had built what Funk described as a well-established and widely accepted business model. He said Liongate’s emphasis on the importance of qualitative manager selection, rather than relying simply on past performance, has allowed it to avoid blow-ups and outperform in a tumultuous market. “Fund managers were building portfolios from the bottom up and maintaining static positions, which structurally forced them to generate index-plus rates of return,” Funk explained. “As head of research, the challenge has been to design and implement manager and market research that could take advantage of current data in an industry characterized by infrequent monthly data points and fat-tail risk.” He also publishes research in academic journals and has served as a visiting lecturer of economics at DePaul University. Prior to Liongate, Funk was with Morgan Stanley Capital International within its Institutional Securities division.“My entry point into the hedge fund industry MAY 2008 occurred while I was employed with Morgan Stanley,” he said.“I co-authored the business model and internal pitch for a new prime brokerage/capital introduction department to be established in Chicago. That role is where I first began mapping out the financial and operational risks and opportunities associated with hedge fund strategies and underlying managers.” The next challenge for Funk is to defend his firm’s position from peers and competitors adopting more active investment models. “In 10 years, I envision Liongate Capital Management to be a highly regarded institutional asset management company that has grown in terms of track record and performance,” he said.“But I also expect it to be a firm that has maintained much of the chemistry in place today.” 7. ALLEN GILLESPIE found that it is best to regard a sense of accomplishment with fear because that is generally when you let your guard down and the wheels come off.” Gillespie noted, however, that he is proud of his work as a commissioner for the South Carolina Retirement System since 2005. “From an alternatives perspective, we went from zero in hedge funds to $4.5 billion in hedge fund and hedge fund-offunds allocations, thereby reducing our significant U.S. equity exposure just as the credit crunch set in,” he said.“I believe we are in the process of creating a very unique program.” According to Gillespie, currency pricing is important to successful asset management. “After the currency crisis of 1997 and 1998, I believed a 16- to 20-year bear cycle was beginning because currency instability is one of the telltale signs of trouble,” he said.“If you can’t reasonably price currency, which is supposed to be a store of value in addition to being a medium of exchange, then you are going to have difficulties pricing any risky assets.” In response, he set up a mutual fund with the ability to hedge its exposure via futures, but it was undercapitalized and folded shortly thereafter. In 10 years, Gillespie hopes to see himself participating in a more normal bull market in U.S. equities and foresees an institutionalization of the industry. “I have HEDGE FUND RISING STARS 23 7. ALLEN GILLESPIE Founder, Principal and Chief Operating Officer GNI Capital, Greenville, S.C. Age: 35 Education: Washington and Lee University (B.A. in Economics) “I never had a mentor, as I started my firm at the age of 24 and consequently had to learn a lot solely through trial and error,” said Gillespie, who founded GNI Capital in September 1997 and now comanages its $250 million in assets. In 2006, he founded Centillion Partners, a holding company responsible for a total of $500 million in assets that include those of GNI Capital and Hamilton Joseph, a retirement services and wealth management firm. Despite his success, Gillespie is quite humble. “In my experience, great things are only accomplished when every individual involved does their part,” said Gillespie, who is a chartered financial analyst.“Moreover, in investments, I have

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The 20 Rising Stars of Hedge Funds 2008 Contents Looking Great for 2008 A Matter of Supply and Demand Return Performance Highlights Challenging Period 20 Rising Stars of Hedge Funds Mentors' Page

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