The first hedge fund in Europe and US to invest solely in the reported share dealings of company directors and senior corporate executives in their own firms is to be launched this month.
Swiss Investment Managers’ Directors Dealings Fund (DDF) will base its long or short investment decisions on publicly announced reports of transactions by company directors and senior management who are using their own money to buy or sell equity in their own firms.
The fund will employ a counterintuitive approach, using a contrarian interpretation of directors’ and managers’ share dealings. The strategy has a low 0.2% to 0.4% correlation to equity capital markets and targets low volatility with strong risk-adjusted returns, generating real alpha, the firms says. The fund is aiming for a risk-adjusted return of around 15%.
The fund will not use leverage or derivatives.
Athanasios T. Ladopoulos, a manager of the fund, says: “Directors and executive management team members generally know more about the companies they manage than outsiders, such as broker analysts or fund managers,” points out Ladopoulos.
“When directors and executives buy significant amounts of shares, that’s a strong signal something good will happen. Conversely, when they sell significant amounts of shares, it’s a signal of tough times ahead.
©2011 funds europe