Development of American Investment Trusts

November 28, 1927

Report Outline
Origin of the Investment Trust
American Investment Trusts

An important by-product of the transformation of the United States from a borrowing to a lending nation has been the rapid development in recent years of the American investment trust. During the generation preceding the European war, British investment trusts played an important part in the economic development of the United States and other countries by mobilizing the free capital of the British middle classes for investment abroad. The world-wide investments of the British trusts had a very important bearing upon the pre-war expansion of British foreign trade for much of the capital they made available to other countries was exported in the form of manufactured goods.

Now that the United States has attained the status of a great creditor nation, with vast supplies of liquid capital seeking profitable investment abroad, American investment trusts seem destined to take a place in world financial organization corresponding in importance to that so long held by the investment trusts of Great Britain. Their activities, if properly conducted, should both fortify the position of the United States as the leading creditor nation and lend great assistance at the same time to the promotion of American foreign trade.

Growth of American Investment Trusts

The first American investment trust patterned after the British model was organized in 1921, but the rapid growth of this and other trusts has come only during the last three years. As recently as January, 1924, the resources of the pioneer American investment trust barely exceeded $500,000. Today they have passed the $20,000,000 mark, and the combined resources of all American investment trusts are in excess of $600,000,000.

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