At the centre of the new insider trading scrutiny are so-called “expert networks.” Well-informed industry insiders get paid good money by hedge funds and other investors to get insight into what’s happening on the ground level.One famed manager who explicitly does not use these networks is short-seller Jim Chanos
Here’s what he said back in 2006 in a WSJ article on their rise:
Concerns about inside information, among other things, have caused some hedge funds to approach his firm and its competitors, which include Standard & Poor’s Vista Research, with caution.
James Chanos, president of Kynikos Associates, a more than $3 billion hedge fund specializing in “shorting” stocks, or betting against them, says he stopped using such firms a couple of years ago. He says he “got increasingly uncomfortable” that the information provided by the firms was either “too good to trade on or too pedestrian to care about.” Kynikos does its own research, he says, “because that’s what our clients are paying us for.”