It is interesting to look back at the history of mutual funds to see how they have evolved from a one off experiment to a trillion dollar industry that the majority of investors from across the whole world have some kind of stake in. Currently, mutual funds are a popular investment vehicle because of the diversification and liquidation that they offer. Mutual funds are not just very popular in developed countries, but in developing countries as well. In fact, in developing countries such as India they are currently expanding at the fastest rate. It is almost hard to imagine that there was a time when there was no concept of the mutual fund.
Mutual funds were relatively unknown until the 1980s, at which time high returns and record highs captured the attention of the mass audience. The idea of a mutual fund – pooling assets for investment, began way back in the 18th century in Holland
King William I of the Netherlands reportedly launched the first investment fund the world has ever seen in the early 1800’s. The apparent motivation for this was to provide diversification for his investors. This idea quickly spread to the UK and France, and then onwards to the US. In 1893, the first closed end fund was launched, in Boston.
Mutual funds in the form that we know them today first appeared in 1924 in Boston. This mutual fund still exists today, and is called MFS Investment Management. Shortly after, the stock market crash of the late 20’s led to the launch of the Securities and Exchange Commission in order to protect investors interested in mutual funds. This commission enacted laws that required all the mutual funds to register with it, and to supply investors with a prospectus that disclosed all information about the fund, the fund manager and the securities. This was a great leap in the evolution of the mutual fund.
The mutual fund industry expanded quickly after that. The end of World War 2 was the catalyst for the explosion in this industry. By the 50’s there were more than 100 funds, and in the 60’s aggressive growth funds were launched for the first time.
In the 80’s and 90’s there was bull ”market mania,” mutual funds became a household word, and high performing fund managers become superstars. However, some shady dealings and the burst of the tech stock bubble brought a sense of reality back to many investors. Mutual funds suffered some set backs, but they survived them and went on from strength to strength.
Nowadays there are more than 10,00 mutual funds in the US alone. Despite the unavoidable hard times the industry suffered in the economic crises of 2008 and 2009, it is continuing to develop and grow, and looks set to continue to do so in the long-term. It all started with King William I of the Netherlands in the early 1800’s and it is now a global multi trillion-dollar industry!
For more information on mutual funds, go to:
en.wikipedia.org
