Diversified trustee shares;

              Bulletin HASKINS & SELLS 43


Diversified Trustee Shares
AN interesting development of the prin­ciple
of the investment trust has been
brought to our attention recently. The
investment trust, although long popular in
Great Britain, is comparatively new in
America. The past few months, however,
have witnessed the introduction of the
principle into American finance, and a
number of developments have taken place.
As used abroad, the investment trust
is a corporation organized to make available
to the general investor the stocks and bonds
of other companies, thereby in a measure
relieving him of the task of finding safe
investments for his money. The corpora­tion
issues shares or debenture bonds to
investors. With the funds so obtained, it
acquires large blocks of securities in other
companies, and distributes the income
therefrom to its own stockholders.
The trustees or directors of the corpora­tion
commonly are allowed to use their
own discretion in the purchase of securities.
Controlling interests in other companies
are sometimes acquired, although such is
not always the case. At times funds from
the sale of new issues are derived by cor­porations
chiefly from such investment
trusts.
The corporation usually is able to inves­tigate
more thoroughly the securities it
buys than is the individual investor. It is
also able to diversify its holdings to a
greater extent, and thus in many cases
to reduce materially the risk of loss to the
individual. In addition, it offers a ready
field for the disposal of new issues by other
companies.
The American development thus far has
proceeded along slightly more cautious
lines. The following is a case in point.
A corporation recently was formed for
the purpose of creating "trustee shares
representing a full participating ownership
in the capital stocks of leading American
corporations." The shares are brought
out in different issues, one issue represent­ing
one combination of stocks, another a
different combination, etc. The corpora­tion
has made three issues to date. The
last was operated as follows.
A certain number of shares of stock in
selected corporations was purchased in the
open market. The stocks were chosen
from those of well-known corporations.
An attempt was made to make the list as
diversified as possible. It included in­dustries
engaged in various lines of busi-