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shorting. Significant low-risk profits could be made by simultaneously buying one type of put and shorting another type. In addition, investors would commonly overreact to news occurring in North American hours, ignoring or underestimating how much less the determinant moving average would change than the next day's move in the Nikkei. This made possible purchases or sales of the puts that created trades with an extremely high probability of profit unless the Nikkei moved by some phenomenal amount.

It is trades like this that motivate Stark. "I get a kick out of it. I like to find something that the market misses. The markets should be rational and efficient, making it intellectually satisfying when you find a substantial mispricing. It is like solving a perplexing riddle or finding a great bargain at a flea market—it is fun."

He continued, "Moreover, the market is a performance-oriented business. It is a real-life puzzle since you and your investors' money are on the line. A risk element exists that is missing in many other intellectual endeavors." Stark also alluded to the market as a good outlet for his competitive spirit.

INVESTORS FROM 22 COUNTRIES

Early on, the investor base was primarily high-net-worth investors. But now there is a growing percentage of institutional investors. "Institutions have the longest time horizon and are more stable. They have an understanding of the business. You need to see things through in arbitrage; you need to stay the course. Institutions do this."

Investors are located in 22 countries. The number of Japanese investors is also on the rise. Arbitrage has seen increased interest from Japanese investors due to regulatory changes; Japanese institutions are now able to invest outside of Japan much more readily. In addition, the Japanese are becoming more knowledgeable about arbitrage and how well it meshes with their search for stable, consistent returns. Due to demand from a Japanese investor, Stark created a product solely focusing on Japanese arbitrage strategy.

Stark also has a fund of funds investor component. In fact, some of their oldest investors are funds of funds. "While you must be cautious about which funds of funds to include in your investor base, those which are truly committed to market neutrality, rather than chasing the