History Of The Mutual Fund
  1. Overview Of The Mutual Fund Industry
  2. History Of The Mutual Fund
  3. How A Mutual Fund Works
  4. Today's Mutual Fund Industry
  5. Fund Investment Qualities
  6. Fund Investment Quality Scorecard (FIQS)

History Of The Mutual Fund

By Richard Loth (Contact | Biography)

Historians are uncertain of the origins of investment funds. There are some indications that the idea of pooling assets for investment purposes began in the Netherlands in the late 18th or early 19th century. Closed-end investment funds did take root in Great Britain and France in the 1800s, making their way to the United States in the 1890s. (For more insight, see Uncovering Closed-End Funds.)

The creation of the Massachusetts Investors' Trust in Boston in 1924, which went public in 1928, is cited as the arrival of the modern mutual fund in the U.S. In 1929, there were 19 open-ended funds competing with nearly 700 of the closed-end variety. The market crash of 1929 wiped out the highly leveraged closed-end funds, but a small number of opened-ended funds managed to survive.

The creation of the Securities and Exchange Commission (SEC), the passage of the Securities Act of 1934 and the Investment Company Act of 1940 put the mutual fund business on a solid regulatory basis with safeguards for investors. In the early 1950s, the mutual fund count topped 100 and continued to grow through the next two decades. The bull markets of the 1980s and 1990s accelerated this growth, pushing the fund count over 3,000, with total assets surpassing the $1 trillion mark during this period.

In response to the mutual fund scandals of the 2003-2004 period, corrective regulatory and industry practices were, and continue to be, enacted. By the end of 2006, the mutual fund business was still growing and mutual funds in the U. S. numbered more than 8,000 with asset holdings of $10.4 trillion and new markets opening up around the world. (For related reading, see A Brief History Of The Mutual Fund.)

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How A Mutual Fund Works

  1. Overview Of The Mutual Fund Industry
  2. History Of The Mutual Fund
  3. How A Mutual Fund Works
  4. Today's Mutual Fund Industry
  5. Fund Investment Qualities
  6. Fund Investment Quality Scorecard (FIQS)
RELATED TERMS
  1. Closed-End Fund

    A closed-end fund is a publicly traded investment company that ...
  2. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  3. Fund Company

    A commonly used term to describe an investment company, which ...
  4. Investment Company

    A corporation or trust engaged in the business of investing the ...
  5. Foreign Fund

    A mutual fund, closed-end fund or exchange-traded fund that invests ...
  6. New Fund Offer - NFO

    A security offering in which investors may purchase units of ...
RELATED FAQS
  1. How do I purchase shares of a closed-end investment?

    Understand the difference between open-end and closed-end funds, and learn how an investor can purchase shares in a closed-end ... Read Answer >>
  2. Why is it that when investors realize returns on a mutual fund, its price tends to ...

    Mutual funds have been in existence since 1924, when the first open-ended mutual fund was created. Since then, the market ... Read Answer >>
  3. How do I calculate the loan-to-value ratio using Excel?

    Learn what a mutual fund and a money market fund are, and understand the differences between each and how they serve various ... Read Answer >>
  4. What risks are associated with a closed end investment?

    Explore the characteristics of closed-end funds as compared to open-end funds, and understand the risks associated with investing ... Read Answer >>
  5. How much of a company's stock can a mutual fund own?

    There is no written rule that stipulates how much of a company a mutual fund can own. Instead, there are two major factors ... Read Answer >>
  6. What are the primary differences between a closed end investment and an open end ...

    Learn what the primary differences are between open-end investments and closed-end investments, and the implications for ... Read Answer >>

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