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essary, Cooperman will travel to relatively remote locations to find investment opportunities. He visits about five companies a week; he is company intensive.

MISTAKES

Cooperman admits to making many mistakes over the years. One was not being more fully invested prior to and during the stock market bull run. "I've been too conservative in the last five years." Overstaying his welcome in non-U.S.-dollar bonds in 1994, and getting caught in the Russian fixed income situation of 1998 were other mistakes.

Omega's 1998 losses were macro oriented, relating to emerging market debt, in particular Russian fixed income. "It had a collateral effect on other emerging markets and limited liquidity. I was disappointed with out ability to adjust positions. In our analysis, we always factored in that Russia could devalue but not that Russia would default." Cooperman has, as a result of his 1998 experience, exited emerging markets as a dedicated business. "I do not want to be in markets where liquidity is not provided."

Cooperman has gravitated back to his core competency—the core returns have always been developed-country equity stocks—primarily U.S. and Western Europe.

RISK CONTROL

There are three elements to the management of risk. Daily reports summarize positions (these include static market exposure, upside target, and stop-loss levels), on a real-time and daily mark-to-market basis. Capital at risk methodology is used, based on stop-loss levels and options premium. When appropriate, Value-at-Risk is used.

Virtually all of the portfolio consists of freely marketable securities. Currently, nonlisted stocks or private placements total less than 0.3 percent of the portfolio. Cooperman says his net exposure tends to average about 65 percent. Leverage has never exceeded about 3.5 to 1, and has typically been significantly less. Returns are principally from the move in the asset owned, not from leverage.

Cooperman hedges by shorting stocks, index options, and futures.

Currently, the macro side is allocated about 5 percent of capital.