NRich::Mind Your Money

About 109 years after the First ever Mutual Fund in Belgium, USA had its own MF in 1893 when Boston Personal Property Trust was created. It advertised that it “was organized for the purpose of giving persons of small means an opportunity to invest in diversified lists of securities held by a trust which was managed by professional trustees which is a regular line of business in Boston.”

But the MF roots in USA took firm hold by the formation of The Alexander Fund in Philadelphia in 1907 by Wallace Alexander. What began as an investment vehicle for a small circle of friends, eventually expanded to include the general public.

If we observe the constitution of the Alexander Fund as well as their investor-friendly philosophy, we cannot believe the Vision of the Promoter more than 100 years before.

The Alexander Fund issued two series of shares each year, in units of $100. The periodic offerings were meant to encourage investors to cost-average their investment. The Fund offered a return of 6% a year. The manager received 10% of income and profits and the fund paid a moderate expense for rent, clerical help, printing and postage. In the middle of 1925 the fund had 460 shareholders, with the fund valued at $1.5 million.

In what was to become an essential feature of “open-end” mutual funds, the Alexander Fund allowed participants to “withdraw on demand and receive the value of the unit on the date (NAV as it is known today) of the withdrawal.” Even more striking, the Fund had the “unusual provision that any one dissatisfied with a security purchased may go to a Board of Overseers elected by the shareholders from among themselves and, if they agree with him, can force the manager to sell the security.”

We will see more evidence of evolution of the MF industry in the posts to come. Stay tuned and do give your feedback.