New fund will adopt boardroom brainstorming strategy

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The Independent Online

Investors may soon be able to tap into the know-how of FTSE company directors, following the launch of an investment trust – a type of fund that can be placed in an ISA – reflecting the thinking of blue-chip bosses.

The theory is that directors are better informed than the market about the companies they run, and that consequently their share dealings should outperform the market across the FTSE 100, FTSE 250 and FTSE Small Cap indices.

Working with Exeter and Bristol universities, Knox D'Arcy Investment Management tracked directors' investment decisions over a seven-year period and found that they outperformed the relevant benchmark by an average of 141 per cent between January 2000 and June 2007.

Based on this research, Knox D'Arcy has launched the Directors' Dealing Investment Trust, which will invest in UK-listed stocks in companies valued at more than £25m.

Steve Marriott, a fund analyst for financial adviser BestInvest, pointed out that fund managers already use this strategy. "Tracking what directors invest in because of their superior knowledge is a good indicator," he explained.

"But in isolation, this approach could be a little weak. Directors can make mistakes just like anyone else, and can often be overconfident about companies they are involved in."

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