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the environment and tries to develop a strategy to take advantage of that environment. He tries to identify the different styles, elements, and configurations of the economy—inflation/recession, low interest rates/high interest rates—and politics.

Kovner trades what is uncorrelated to the stock market. "The rule is to try hard to have uncorrelated strategies." He believes this is one of his edges since other managers may not do this carefully. Many analytics are used to measure noncorrelation of markets and trades under a number of varying conditions—even conditions that don't exist today.

For Kovner, diversification is more than just a platitude; it is a way of life. "The objective is to trade any political or economic environment well. One defining characteristic is that we want to seize opportunities in many markets. We try to keep the portfolios balanced so if we are wrong or if an exogenous event occurs, we don't pay such a high price." He doesn't risk more than 2 percent of the fund's equity on one idea.

Kovner does not want to be committed to any one approach. He doesn't want to be among those players who say, "The market is wrong or doing something it shouldn't be doing," or "I'm unsympathetic to the market/events." Rather, he wants a diverse, robust group of income streams that are uncorrelated to help control risk and correlation.

As a result, Kovner has 27 trading centers that provide this diversification. While the teams range in size from two to ten people, they are usually two to three people. Some represent regions; others represent trading strategies such as macro, equity, arbitrage, or quantitative techniques. Each trading center is strong on its own and not highly correlated to the others.

"With this structure, we are able to take advantage of different environments and we are not excessively at risk by relying on one style," Kovner explains. "The key is to constantly adapt and find the strategy that works."

He says, "It is wrong to assume [a specific] environment will continue forever." For example, he notes that value investing is not good now (May 2000) due to money flows. But at some time, value investing will again become good. He finds it useful to develop signposts that mark when an environment is ending. Examples of such signposts? While none are foolproof, one good example is a high degree of consensus, which tends to create opportunity in the other direction.

To those that predict the demise of global macro, Kovner disagrees