Unlike in private equity, an early-stage venture investment is a bet on the founder. If an early advisor, IP holder, or previous investor holds significant control, it creates friction and hinders the CEO's ability to execute. QED's experience shows that these situations are untenable and should be avoided.

Founder and CEO Michael Kehoe owns a $350M stake in Kinsale. His compensation, and that of his team, is tied to profitability metrics like ROE and combined ratio, not just revenue growth. This creates powerful alignment with long-term shareholder interests.

To ensure true alignment and 'skin in the game,' offer proven managers the opportunity to buy into the HoldCo's equity rather than giving them stock grants. People value what they pay for, creating a stronger sense of ownership and long-term commitment.

The UK market is characterized by cheap valuations, poor corporate governance, and low insider ownership. These factors often trap value investors, with private equity takeovers being the primary catalyst for realizing returns, as organic market mechanisms fail to correct undervaluation.

Despite low insider ownership, management's alignment with shareholder value is demonstrated by their capital allocation. They don't just pursue growth via acquisitions; their willingness to divest non-core businesses shows a disciplined focus on building a coherent, high-return industrial technology platform.

Investment research suggests the significant performance signal in governance isn't achieving a perfect score, but rather avoiding companies in the worst decile. The key is to steer clear of clear red flags—like misaligned boards or poor capital allocation—as this is where underperformance is most clearly correlated.

Empirical studies show that the strongest investment returns don't come from insider buying or value investing in isolation. The key is the combination: systematically buying stocks that exhibit C-suite insider purchasing and also rank in the cheapest deciles based on quantitative value metrics.

When screening for insider activity, purchases by the Chief Financial Officer (CFO) may warrant special attention. Academic research indicates that CFOs, perhaps due to deeper financial acumen and risk awareness, have historically achieved better investment results on their personal stock purchases compared to CEOs.

To sharpen the insider buying signal, the firm analyzes proxy statements to exclude purchases made solely to satisfy board-mandated ownership requirements. Only voluntary, 'free will' buys are considered true indicators of an insider's belief that the stock is undervalued.