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Rating:A Boutique Bangs Its Drum for Insider Buying Not Rated 5.0 Email Routing List Email & Route  Print Print
Monday, July 15, 2013

A Boutique Bangs Its Drum for Insider Buying

Reported by Tommy Fernandez

If you run a company, you should be the best judge regarding its health and future success, right? And if you buy a lot of the stock, that should mean something, right?

Well, that's the premise behind three funds being marketed by Catalyst Funds [profile].

"Intuitively the strategy makes sense. Corporate executives know more about the details and future prospects of the companies they run than any outsider or analyst possible could. What they do with their own hard-earned money speaks volumes as to what they truly believe about the future of their company. It is easy for clients to understand why the strategy should work,” chief executive Jerry Szilagyi recently told MFWire.

PMs at Catalyst have conducted research on corporate insider trading and believe that they have identified the characteristics of insider trading activity that are most predictive of future stock performance, according to Szilagyi.

First off, the funds have been helped by recent performance. For example, the Catalyst Insider Buying Fund is up +41.2 percent over the last 12 months through Friday versus 31.0 percent for the average large cap value fund according to Morningstar. And the Catalyst Strategic Insider Fund is up 25.3 percent versus 12.4 percent for the average long/short equity fund during the same period.

It also doesn't hurt to have brand name, based in part, on a concept that at times has been somewhat controversial.

Szilagyi says the funds "have been getting a lot of attention lately, specifically regarding its “Insider Trading” investment strategies, without a large scale, traditional advertising campaign. And, its unique strategy and great performance adds to growing industry and media appeal."

"You need to offer unique investment strategies that make sense and are relatively easy for advisor’s clients to understand," he said.

Szilagyi continued, “once you have a good product, you need to get the word out. At Catalyst, we use a variety of methods, including direct marketing such as emails combined with an internal and external wholesale effort and PR. You also have to get your product available on distribution platforms, which is getting harder and harder for smaller fund families." 

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