THE ALMOST FABULOUS growth of the open-end investment company has been termed “the most important single development in the financial history of the United States during the last 50 years” by the Securities and Exchange Commission.1 From 1924, when the first two open-end companies were organized, the industry has grown spectacularly to a thriving group of over 100 companies. Total assets, but $140 million in 1929 and $64 million during the Depression two years later, had risen to $370 million in 1937.2 In 1940, when the great expansion of investment companies began, assets were about $450 million, and by the end of 1950 they had reached the tremendous total of $2.5 billion, a ten-year growth of almost 500%. (Table I.)

The open-end investment company is but one type of investment company, which is a financial institution whose sole business is the investment in securities of the money entrusted to it. The size of the open-end segment as well as its differentiating aspects are such that it can validly be considered a distinct branch of business, that is, an industry. This thesis will mention open-end investment companies by other names, including “mutual funds,” “investment trusts,” and simply “investment companies.” Its particular differentiating features are two: the continual offering (at net asset value plus a commission) of new shares for sale and therefore unlimited capitalization, and the readiness to redeem shares at net asset value. The other form of investment ...

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