The history of the unit investment trust

The industry development of the investment funds in the USA.

The first fund in the world appeared in the USA in 1924 and was called “Massachusets Investory Trast”. One of the most difficult crises in the world economics fell at this time that is why mutual funds as a new investment for instrument were taken by population watchfully. The lack of a developed legislation made the questions on funds taxation more complex. Hereby, investors were not attracted by mutual funds for a long time.

In 1939 in the USA a law on trust was passed and in one year – a law on placement of funds. However a break-neck growth of mutual funds began only in the middle of 1950s. While in 1951 they managed $ 57 millions of accounts placed on 22 thousands of accounts, in 1960 there were already $ 540 million on 179 accounts and by 1963 these figures increased up to $ 1 billion and 324 accounts.

The majority of the investors turned their attention to unit trusts only in the end of 1970s – beginning of 1980s of the last century when percents, proposed by banks were so low that they didn’t cover even the current rate of inflation. Those, whose holdings exceeded $ 10 000 had a possibility to take their money out from the banks and to invest money in stocks that were more profitable. But most of small savers didn’t have such a possibility.

The alternative appeared together with the appearance of the unit investment trusts oriented on investments in foreign currencies and foreign currency assets. Currency funds caused a furor in America. They pooled funds of investors with a purpose to buy conservative foreign vehicles which a private investor wouldn’t be able to buy on his own. Such investment funds provided profitability up to 20 % interest per annum and retail investors could also become share owners of such funds while earlier they had one alternative variant – to deposit to a bank with 5 % interest per annum.

By 1982 currency fund assets made up $ 200 billion. During 1980s equity funds earned 14, 9 % yearly at the average. One thing is notable, in 1990 the investigators suggested that overall fund assets in the USA will reach $ 2 trillion by 1995-96 and by 2000 – up to $ 3 trillion. Though already in 1997 aggregate assets of American funds reached $ 4, 5 trillion, total amount of funds exceeded 70 thousands and number of shareholders – 150 million people. According to assessment these accounts belong to 40 % of American families. In many respects the investment industry funds growth became effective due to American government support. Mutual funds became the main links in US pension system. According to the plan given, the organizations deduct a part of the salary of their employees monthly (before tax) to some investment vehicle, among which there are unit investment funds.

Consequently, today investment funds in the USA prevail on the market of capitals. They are the most active investors, whose every step is closely watched by the market participants. Mutual funds play a substantial part also on the market of government securities. American federal and municipal officials often turn to funds for selling obligations and getting the financing of long-term projects. Funds finance American government through the investments to government capital issues. Investment funds provide new capital inflow to the market of mortgage accommodation.