| Mutual funds really captured the public's
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| | and Exchange Commission (SEC), the
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| attention in the 1980s and '90s when
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| | passage of the Securities Act of 1933 and
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| mutual fund investment hit record highs
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| | the enactment of the Securities Exchange
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| and investors saw incredible returns.
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| | Act of 1934 put in place safeguards to
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| However, the idea of pooling assets for
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| | protect investors: mutual funds were
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| investment purposes has been around for a
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| | required to register with the SEC and to
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| long time. Here we look at the evolution
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| | provide disclosure in the form of a
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| of this investment vehicle, from its
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| | prospectus. The Investment Company Act of
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| beginnings in the Netherlands in the
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| | 1940 put in place additional regulations
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| eighteenth century to its present status
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| | that required more disclosures and sought
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| as a growing, international industry with
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| | to minimize conflicts of interest. (For
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| fund holdings accounting for trillions of
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| | further reading, see Policing The
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| dollars in the United States alone.
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| | Securities Market: An Overview Of The
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| In the Beginning Historians are uncertain
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| | SEC.) The mutual fund industry continued
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| of the origins of investment funds; some
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| | to expand. At the beginning of the 1950s,
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| cite the closed-end investment companies
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| | the number of open-end funds topped 100.
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| launched in the Netherlands in 1822 by
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| | In 1954, the financial markets overcame
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| King William I as the first mutual funds,
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| | their 1929 peak, and the mutual fund
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| while others point to a Dutch merchant
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| | industry began to grow in earnest, adding
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| named Adriaan van Ketwich whose
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| | some 50 new funds over the course of the
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| investment trust created in 1774 may have
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| | decade. The 1960s saw the rise of
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| given the king the idea. Van Ketwich
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| | aggressive growth funds, with more than
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| probably theorized that diversification
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| | 100 new funds established and billions of
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| would increase the appeal of investments
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| | dollars in new asset inflows.
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| to smaller investors with minimal
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| | Hundreds of new funds were launched
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| capital. The name of van Ketwich's fund,
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| | throughout the 1960s until the bear
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| Eendragt Maakt Magt, translates to "unity
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| | market of 1969 cooled the public appetite
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| creates strength". The next wave of
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| | for mutual funds. Money flowed out of
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| near-mutual funds included an investment
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| | mutual funds as quickly as investors
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| trust launched in Switzerland in 1849,
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| | could redeem their shares, but the
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| followed by similar vehicles created in
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| | industry's growth later resumed.
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| Scotland in the 1880s.
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| | Recent Developments In 1971, William
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| The idea of pooling resources and
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| | Fouse and John McQuown of Wells Fargo
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| spreading risk using closed-end
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| | Bank established the first index fund, a
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| investments soon took root in Great
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| | concept that John Bogle would use as a
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| Britain and France, making its way to the
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| | foundation on which to build The Vanguard
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| United States in the 1890s. The Boston
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| | Group, a mutual fund powerhouse renowned
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| Personal Property Trust, formed in 1893,
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| | for low-cost index funds. The 1970s also
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| was the first closed-end fund in the U.S.
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| | saw the rise of the no-load fund. This
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| The creation of the Alexander Fund in
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| | new way of doing business had an enormous
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| Philadelphia, Pennsylvania, in 1907 was
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| | impact on the way mutual funds were sold
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| an important step in the evolution toward
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| | and would make a major contribution to
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| what we know as the modern mutual fund.
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| | the industry's success.
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| The Alexander Fund featured semi-annual
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| | With the 1980s and '90s came bull market
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| issues and allowed investors to make
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| | mania and previously obscure fund
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| withdrawals on demand.
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| | managers became superstars; Max Heine,
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| The Arrival of the Modern Fund The
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| | Michael Price and Peter Lynch, the mutual
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| creation of the Massachusetts Investors'
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| | fund industry's top gunslingers, became
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| Trust in Boston, Massachusetts, heralded
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| | household names and money poured into the
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| the arrival of the modern mutual fund in
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| | retail investment industry at a stunning
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| 1924. The fund went public in 1928,
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| | pace. More recently, the burst of the
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| eventually spawning the mutual fund firm
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| | tech bubble and a spate of scandals
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| known today as MFS Investment Management.
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| | involving big names in the industry took
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| State Street Investors' Trust was the
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| | much of the shine off of the industry's
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| custodian of the Massachusetts Investors'
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| | reputation. Shady dealings at major fund
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| Trust. Later, State Street Investors
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| | companies demonstrated that mutual funds
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| started its own fund in 1924 with Richard
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| | aren't always benign investments managed
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| Paine, Richard Saltonstall and Paul Cabot
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| | by folks who have their shareholders'
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| at the helm. Saltonstall was also
| |
| | best interests in mind and who treat all
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| affiliated with Scudder, Stevens and
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| | investors equally.
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| Clark, an outfit that would launch the
| |
| | Conclusion Despite its recent troubles,
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| first no-load fund in 1928. A momentous
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| | the story of the mutual fund is far from
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| year in the history of the mutual fund,
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| | over. In fact, the industry is still
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| 1928 also saw the launch of the
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| | growing, opening up new markets around
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| Wellington Fund, which was the first
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| | the world.
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| mutual fund to include stocks and bonds,
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| | The first Korean mutual fund, the Mirae
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| as opposed to direct merchant bank style
| |
| | Asset Park Hyun-joo Fund, was launched in
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| of investments in business and trade.
| |
| | Dec 1998. Today there are 20 trillion
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| Regulation and Expansion By 1929, there
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| | Korean won (about US$19.32 billion)
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| were 19 open-end mutual funds competing
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| | invested in Korea's funds. In the U.S.
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| with nearly 700 closed-end funds. With
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| | alone there are more than 10,000 mutual
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| the stock market crash of 1929, the
| |
| | funds, and if one accounts for all share
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| dynamic began to change as
| |
| | classes of similar funds, fund holdings
|
| highly-leveraged closed-end funds were
| |
| | are measured in the trillions of dollars.
|
| wiped out and small open-end funds
| |
| | Despite the launch of separate accounts,
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| managed to survive.
| |
| | exchange-traded funds and other competing
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| Government regulators also began to take
| |
| | products, the mutual fund industry
|
| notice of the fledgling mutual fund
| |
| | remains healthy and fund ownership
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| industry. The creation of the Securities
| |
| | continues to grow.
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