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and says such predictions usually occur at the end of popularity cycles. "You need to avoid crowd judgment." When business cycles swing (e.g., the Fed chomps down or central banks are active), big shifts are created. In periods of instability, global macro will make lots of money. Kovner says now that there is higher stability and regular currency movement, it is a great period for other styles. "Our structure allows us the opportunity to focus and choose the trading style that is most appropriate for the period. . . . Global macro will be back."

Currently, global macro accounts for 25 to 30 percent of the portfolio. Though this amount varies based on the period, it is a smaller percentage than it had previously been. The typical allocation is more in the range of 30 to 60 percent. "Over the past 24 to 30 months, rewards from global macro have been low. So risk attached to it is low."

Today, Kovner sees many opportunities. "The hard part is balancing those risks. Every asset class is in disequilibrium—currencies, fixed income, commodities, and stocks." Kovner says that many investors ask whether the European currency consolidation has eliminated currency trading opportunities. "There are so many more opportunities than before. Some currencies have been lost [with the advent of the euro], but more currencies can be traded now such as those in Eastern Europe. And as the financial markets develop, more tools exist. In the 1970s when I began trading, there were only T-bills and GNMAs; today there are over-the-counter structures. As the financial markets develop, there are so many more tools to express a view. There are hundreds of instruments now."

Kovner does not like to be publicly quoted on market direction because he doesn't want to be perceived as a market guru. He also needs the flexibility to change his mind—without encumbrances—in the event he has to.

In 2000, Caxton's Essex fund was up 33.4 percent. Kovner says, "Caxton's diversified portfolio worked about the way we had hoped. Macro was poor in the first half, excellent in the second; equities strong in the first half and okay in the second. Our absolute return and quant strategies worked well throughout the year."

Kovner spends most of his time developing strategy, risk control, and risk allocation. "Most people don't know that I am not the principal trader. I get other people to trade well and allocate resources to them. I develop structures that do it well. I pay attention to how you