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equity managers but that his positions are smaller. Tepper says if opportunities arise in private equity, he may take them.

Some of the managers are involved with private equity through separate entities. For example, Ainslie created a strategic relationship and played an instrumental role in creating Brazos Investment Partners in late 1999. He is keeping the hedge fund separate but can benefit from the information and expertise of the other organization. He feels private equity requires someone with different skill sets than are needed in a hedge fund—someone to evaluate opportunities and negotiate. Furthermore, private equity is difficult to hedge.

Kovner has a joint venture with Fred Iseman called Caxton Iseman Fund. One of the Caxton funds has the flexibility to allocate a small percentage to illiquid investments such as private equity which an investor must hold for several years.

Paloma's investment in the Cathay Fund is less than 1 percent of Paloma's assets. Within the Cathay Fund, there are six publicly listed companies and seven private unlisted companies, so it is in part private equity.

Cooperman, Henry, Griffin, Och, and Stark generally make no allocation to private equity.

Rajaratnam does not have any plans for private equity at this time, though it has been discussed by his board of advisers.

MARKET EXPOSURE AND HOW IT IS HEDGED

Net exposure to equity markets, as a measure of risk, compares short positions to long positions. Market exposure is calculated by subtracting short exposure from long exposure. It is criticized by some as being confusing, and it may mask whether a manager is massively long or massively short. For example, if a manager has a 10 percent net long exposure, he can get there in a many ways. He could be 40 percent long and 30 percent short or he could be 100 percent long and 90 percent short. Generally, the less net exposure, the less risk in a down market; but it depends on stock selection and how long and short the components.

Net exposure varies across the board. Cumberland's and Cooperman's equity exposure averages about 65 percent. Kingdon's is currently under 50 percent but over the past five years has averaged about 56 percent. Maverick's average net exposure is 48 percent. Rajaratnam's exposure ranges between 30 percent and 40 percent. Kovner's long ex-