What is ‘smart’ money?

We seek superior long-term returns emphasizing risk management and broad diversification in tailored strategies employing Global Key’s InsideTrack® portfolios.

A majority of active investment strategies underperform indexes. Few insights or information sources are unique, and even savvy managers face relentless competition. When a fund outperforms over time, distinguishing luck from skill can remain difficult. Vested agendas have long sustained high industry fees, although a gradual shift toward passive indexing underscores a growing recognition that efficient markets do not necessarily justify the expenditures.

Approaching Wall Street as an ‘information food chain,’ the InsideTrack® portfolios began in 1996 by evaluating whether ‘smart money’ existed in trackable forms that could be mimicked to reduce risk and raise returns across diversified portfolios. Offered primarily to public company officers and directors, InsideTrack® attracted a unique brain trust for developing industry outlooks while merging practitioner perspectives with academic research to become increasingly quantitative over time. The development of a trading strategy is a continuous process with approaches that evolve, but a constant willingness to test and refine potential ‘smart money’ datasets has led to the many original insights which drive what we do.

We seek to remain agnostic on near-term market direction and will generally avoid trend plays, macro predictions, market timing, sector opinions, or ‘gut’ calls. Consistent within our approach has been a sustained effort toward developing and following signals around the complexities within insider trading disclosures.

Working closely with insiders has spurred us to consider novel but important questions around insider trading not raised in the over 200 academic papers covering the topic. Behavioral factors matter. As one example, we applied a unique time series analysis toward insider trading which established that insiders over time get worse at acquiring shares while improving at selling and that the rarity of an insider’s trading correlates positively to performance. We have multiple publications pending and actively incorporate our findings into our ‘smart money’ approaches.

Although insider trading disclosures have consistently been important to our thinking, we live in a world of exponentially growing datasets and we continually explore for opportunities. Our guiding beacon, however, will always be ‘smart money.’