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posure to the stock market has always been low, in the 10 to 25 percent range. Och's exposure is less than 10 percent. Stark prefers to use a hedge ratio, but in his case, net exposure is 70 to 90 percent. Cumberland's net exposure to the market is 70 percent.

The managers use different vehicles to hedge. Ainslie's hedging strategy closely resembles that of A. W. Jones—the first hedge fund. While not perfectly hedged, it is much more hedged than the typical fund. Ainslie doesn't use futures and options as hedging tools. He feels that sophisticated investors can use futures and options to place their own hedges. His value-added is shorting stock.

Rajaratnam and Griffin also describe themselves as close in concept to the A. W. Jones model. Short positions are as important as the long positions, says Rajaratnam. Rajaratnam also prefers shorting stocks. While options are used, they tend to be more expensive. Moving to cash is another alternative he takes.

Keeping assets in cash while also using futures, options, and short selling is a technique used by Kingdon. Tepper, at the time of the interview, was heavily into cash (September 2000) because he feels the market is not going anywhere and the probabilities of a favorable outcome are not high. Besides cash, he'll use S&P futures and treasuries. Sussman moves to cash as well.

Cumberland will also hold cash. Occasionally, the firm's managers use paired securities tactics or use index- and company-specific options to effect short strategies. Shorting stock is done to make a profit rather than to hedge.

Cooperman shorts stock, index options, and futures.

Stark says the firm tries to hedge most risk and typically overhedges on a theoretical basis. He says currency exposure is fully hedged but interest rate exposure hedging is variable. Where it is possible to do an asset swap or a credit or buy default protection, they will do so. They may also short high-yield bonds, short other convertibles, or short credit derivatives.

Options volatility swaps are used by Singer and Sussman to protect the portfolio when there are large movements.

Most of what Kovner trades is not correlated to the stock market to begin with. Singer also takes the approach of doing as much as possible in distressed securities and arbitrage that is uncorrelated to the stock and bond markets. Where positions are subject to market forces, Singer