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institutions are lowering their fixed income allocation. Where are they putting it? Equities have peaked, so the search is on for diversification. Therefore there is demand for top-quality alternatives.

Kovner feels that institutions now have a higher sophistication level on portfolio theory and alternative investments. "There is an increasing perception of absolute return investments (i.e., those investments that are not correlated to the S&P)—that these are a good thing to have . . . Over the next 10 years, their perception will grow that it is good to have investments uncorrelated to the S&P that can also do well when the S&P does well or does not do well—inverse correlation." These investments will provide relatively stable returns with a high Sharpe ratio and low standard deviation. Kovner expects that those investment vehicles with low correlation to the S&P and a high-quality rate of return will see demand grow over the next 10 years and see cash flow into them from institutions.

MUSIC, EDUCATION, AND RARE BOOK COLLECTING

Kovner is quite enthusiastic about his activities outside work as well. He is very much into music. Even though he says he is a bad piano player, he plays every day. He is active with the Juilliard School—to play music as well as to listen.

Education reform is a second passion. In 1996, he set up a foundation with $6 million for school reform. The School Choice Scholarship Foundation gives scholarships to poverty-level students in New York City, in first through sixth grade, to go to private school. Vouchers are offered to 1,300 children, paying up to $1,400