Clarity & Insights
Frequently Asked Questions
General
The Inside Ownership Index is an index measuring the performance of shares owned by insiders. Just as the S&P 500 serves as a proxy for the general economy, the IO 100 represents corporate decision makers at the highest level.
The S&P 500 weights companies by free-float market capitalization, which discounts shares held by insiders. The IO 100 instead adds weight back to companies with significant insider ownership, capturing alignment as a factor. This results in a portfolio that looks very different from the standard index—tilting toward founder-led companies and businesses where leadership has “skin in the game.”
Insider ownership aligns leadership incentives with shareholder outcomes. When executives and founders hold large equity stakes, they are directly impacted by the company’s performance, often leading to better long-term decision-making, accountability, and shareholder returns.
Methodology
Insider ownership includes shares held by company executives as stated by the SEC DEF 14A fillings, directors, founders, and other affiliated insiders reported in SEC filings. These holdings reflect meaningful equity stakes, not just token amounts of stock.
The IO 100 is rebalanced quarterly, in line with standard index practices, using the latest available SEC filings to update insider ownership levels.
Traditional indexes like the S&P 500 reduce a company’s market cap by excluding insider shares (free-float adjustment). The IO 100 does the opposite—it intentionally captures those insider shares as a measure of alignment, giving companies with large insider holdings more representation.
Philosophy & Impact
Historically, the IO 100 has outperformed the S&P 500 over the long term. This simple methodology has produced a 2% per year alpha against the S&P 500 since 2005 when data became available.
By rewarding companies where leadership is highly invested, the IO 100 implicitly promotes accountability and long-term alignment. Leaders who own significant equity stakes are more likely to prioritize shareholder value creation.
Misalignment can lead to poor capital allocation, excessive risk-taking, or short-term decision-making. Alignment helps ensure that leadership’s incentives match those of investors.
Traditional factors focus on market metrics like price-to-earnings or stock momentum. The IO 100 introduces ownership alignment as a factor, a fundamentally different lens that captures the human side of investing—who’s actually running the company and how invested they are in its success.
