 Go active or stay passive: Investment trust, financial innovation and diversification in Belgium's early daysJan Annaert and Gertjan Verdickt Explorations in Economic History, 2021, vol. 79, issue C Abstract: In 1836, Société Générale created the world's first closed-end equity fund, Mutualité Industrielle. It promised to be a diversification tool targeted towards less-wealthy investors. We confirm that the trust's returns were indeed better than returns on synthetic portfolios such investors had access to. However, it never became a commercial success. This paper presents a possible rational explanation why this innovation was liquidated in 1873. First, we show that the trust offered a performance similar to randomly-selected portfolios. Second, portfolio strategies to which mostly wealthy and sophisticated investors had access were able to outperform the trust. Mutualité Industrielle's failure to offer a sufficiently attractive alternative to investors is consistent with its difficulty to attract sufficient funds to keep the trust in business. Keywords: Diversification; Investment trusts; Financial innovation; Investor behavior (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:exehis:v:79:y:2021:i:c:s0014498320300802 DOI: 10.1016/j.eeh.2020.101378 Access Statistics for this article Explorations in Economic History is currently edited by R.H. Steckel More articles in Explorations in Economic History from Elsevier |
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