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low because the portfolio is balanced with short and longs, Kovner feels VaR isn't good at capturing basis risk. "We've developed techniques to understand risk outside VaR."

Kovner acknowledges that market volatility can be both a friend and an enemy. Day traders have had an impact on market volatility as well. But generally Kovner finds market volatility is an opportunity. "We've learned how to take advantage of volatility—not let it hurt us." Kovner feels this is another edge—something that other managers may not have been able to solve as well as Caxton has.

Kovner feels that many of the long stock traders that call themselves hedge fund managers will eventually go through a shakeout in the inevitable bear stock market because they don't have adequate risk control.

PERSONAL SATISFACTION

Kovner did considerable economic analysis in his undergraduate and graduate days at Harvard University and a good amount of political work. From 1968 until 1970, he was a teaching fellow at Harvard. He had articles published in Commentary, The Public Interest, and New York magazine.

From 1970 until he joined Commodities Corp. in 1978, Kovner did consulting work on public policy questions for the likes of the U.S. Congress, the National Science Foundation, the University of Pennsylvania, Harvard University, and the State of New York. Eventually he gave up academic life. Sitting in a room writing articles was not for him. It bothered him that he didn't know if he was right or wrong—there was no feedback.

Kovner feels his career has been a natural progression. "I love what I do. I'm in the cockpit managing information, coming in from all over the world. . . . I can hire people who help me understand it. I have friends and associates all over the world in every major financial capital. How many people are willing to take calls at 3 A.M.?" Creating a community of people who are smart and whom he can talk to gives him a great deal of personal satisfaction.

Kovner also gets satisfaction in developing new strategies. The process motivates him and he finds the intellectual work interesting. "It is fun to figure things out. The markets are like puzzles. If you're right, the market tells you and you are rewarded financially. I get a