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judgment of the economy/environment and then seeks out specific opportunities.

Kingdon describes his approach as top-down and bottom-up. Top-down analysis determines portfolio structure and industry concentrations, while opportunities uncovered by individual stock research (bottom-up) are important as well.

TAX EFFICIENCY.

Tax efficiency did not appear to be a major priority of the managers. Most let the fundamentals determine the course of action. The managers are tax sensitive when they can be (e.g., at year-end), but tax efficiency is not the main driver. Strategies such as arbitrage are naturally not tax efficient since a significant amount of trading is going on in the portfolio.

Yet a few exceptions exist. Singer's U.S. fund achieves excellent tax optimization since its goal is long-term gains. Cooperman is planning a fund with a three-year lock-up that will be more tax sensitive. Tax efficiency is something that Ainslie considers. He says, in an average year, over half their gains are unrealized.

COORDINATOR, OVERSEER

Rather than be the one key decision maker, as may have been the case in the early days of the organization, the key person's role has often evolved as the overseer or the coordinator of the team. Often this role includes being in charge of risk management or capital allocation. In some cases, this is the key person's main function.

For example, Kingdon determines how invested the firm will be. Griffin plays the role of coordinator, strategist, risk manager, and capital allocator. Kovner spends most of his time developing strategy, risk control, and risk allocation. He spends time on how to grow the business and developing structures that work. Singer is the senior risk manager, has input on position size, and is responsible for all positions.

Ainslie's focus is on asset allocation, risk control, and being a sounding board. His input drives the size of positions. He makes sure the analysis is complete and all the relevant resources have been brought to bear.