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traders are doing a great job. "You can do a great job in a tough market and still lose money. You should not be penalized because you faced a tough market environment in your niche and another trader dealt in a sector where everything was being bid up."

Located in Wisconsin, Stark feels they are less influenced by herd mentality because less interaction exists with their peers or brokers. In hiring staff, he is looking for a certain person who wants a certain quality of life. Many have Midwestern ties. "They are loyal and stable. We are looking to hire for the long term. We have low turnover."

Stark likes to hire people from MBA programs and develop people in-house. The firm recruits from the University of Chicago, North-western University, the University of Wisconsin, and the University of Indiana; but they typically do not hire people from banks or brokerage firms. When they are looking for more experienced candidates, they hire from other buy-side firms such as insurance companies, mutual funds, or hedge funds.

Stark describes the culture as a cautious one. "We are slow to bring on new strategies. In risk arbitrage, we do not invest in rumor deals; we wait until the deal has been announced. We are always hedging. You could describe our personality as risk-averse."

NO FIXED LEVEL OF CAPACITY

Stark answered the capacity concern question a bit differently than some of the other superstar managers. He observed that capacity changes with the markets and the environment. "There is not a fixed level of capacity. . . . At points when there is not sufficient opportunity or there are significant macro risks, taking capital is not the right thing to do. At other times, capacity can be beyond the capital of even the largest arbitrage fund."

Now, Stark says, in convertibles the amount of issuance has been increasing and the size of the deals has been getting bigger. In Europe recently, one company issued 2.5 billion euros of a convertible. Ten years ago, $200 million was a decent size for a new issue. In risk arbitrage, there is tremendous opportunity now as deal after deal comes out.

Discussing the advantages of being a large fund, Stark says advantages to size include obtaining better financing rates. Size is important to borrowing rates, rebates, and obtaining stock lending. Size impacts