A big happy birthday to the open-end managed fund, born this day in 1924 – they are now 100 years old.
On March 21, 1924, MFS established Massachusetts Investors Trust (MIT), the first US open-end mutual fund (known as a managed fund in Australia), revolutionising an industry and opening the door to investing for millions of everyday investors.
The concept of pooling resources for investment purposes is not new and has roots going back centuries. However, the first mutual fund as we recognise it today emerged in the late 19th and early 20th centuries. The creation of the first mutual fund is often attributed to the establishment of the “Massachusetts Investors Trust” in Boston, Massachusetts, in 1924. This mutual fund was groundbreaking in making the stock market more accessible to the average investor, offering diversification and professional management.
Before the Massachusetts Investors Trust, there were investment vehicles that resembled mutual funds. In Europe, for instance, investment trusts in the Netherlands and the UK allowed investors to pool their capital to invest in diverse portfolios, but these were typically closed-end funds with a fixed number of shares.
The Massachusetts Investors Trust was the first open-end mutual fund, meaning it allowed investors to buy in or sell out at the net asset value of the shares, which was calculated daily. This feature differentiated it from closed-end funds, making it far more accessible and flexible for individual investors. The fund was established with a focus on diversification, allowing investors to spread their risk across various securities, which was a novel approach for individual investors at that time.
The success of the Massachusetts Investors Trust, which grew rapidly in assets and investors, led to the establishment of more mutual funds in the United States. The stock market crash of 1929 and the Great Depression highlighted the need for regulation to protect investors. In response, the U.S. government enacted the Securities Act of 1933 and the Securities Exchange Act of 1934, which laid the groundwork for securities regulation. However, specific to mutual funds, the Investment Company Act of 1940 was pivotal. It set standards for the organization and operation of mutual funds, including requirements for disclosures, financial management, and the fiduciary responsibilities of fund managers.
After the regulatory framework was established, the mutual fund industry began to grow steadily. The introduction of new types of funds, such as bond funds, money market funds, and index funds, expanded the choices available to investors. The Vanguard Group’s launch of the first index fund for individual investors in 1976 marked a significant innovation, offering low-cost exposure to the performance of the entire stock market.
Today, mutual funds are a cornerstone of individual investment strategies, with thousands of funds offering a wide range of investment objectives, from conservative income-focused funds to aggressive growth funds. Technological advancements have made investing in mutual funds easier and more accessible than ever, with online platforms and robo-advisors offering automated investment services.
The history of the mutual fund industry is a testament to the evolution of financial markets and the democratisation of investing. From its inception with the Massachusetts Investors Trust, the mutual fund has become an essential tool for individual investors around the world, providing access to diversified investments managed by professionals.
Interesting timeline:
1 MFS Massachusetts Investors Trust (MITTX) 1924
2 Putnam Investors Fund (PINVX) 1925
3 Pioneer Fund (PIODX) 1928
4 Vanguard Wellington Fund (VWELX) 1929
5 CGM Mutual Fund (LOMMX) 1929
6 Fidelity Fund (FFIDX) 1930
7 Dodge & Cox Balance Fund (DODBX) 1931
Who has survived?
Looking for something in particular or have some feedback? Please reach out to one of the RIPPL team
Research IP delivers high quality investment fund research and consultancy services to financial advisers, charities & NFPs, and the broader financial services industry. Our experience spans well over 20 years working directly across the multiple facets of finance, so we understand the key drivers and challenges for managers, as well as the impact on investors and the broader industry.
We strive to give you the best information, so you can help your clients make better decisions, and feel more confident about doing business with you. We believe that not only can everybody win, but everybody should.
Reach out to us today about your research and consulting needs, and how to make the data work for you, and your clients.
Stay updated with our latest news. Sign up for our newsletter.
Would you like to see research on a Managed Fund? Then enquire here.
Photo credits: MFS
Comments are closed