Happy 150th Birthday, Closed-End Funds

June 11, 2018

Happy 150th Birthday, Closed-End Funds

May 25, 2018 | Nick Robinson | WealthManagement.com 

This year marks 150 years since the birth of closed-end funds. In many ways, they’ve never looked better. Closed-end funds were first created in the U.K. in the 1800s as a way for the investing public to access a diversified portfolio of investments at a reasonable cost. Over their long history, they’ve stayed remarkably true to their mission of connecting intrepid investors with new and compelling opportunities around the world.

The first closed-end fund (or investment trust, as they are known in the U.K.) was the Foreign & Colonial Government Trust, established in 1868. It was met with its share of skepticism. The fund’s focus was considered by many to be quite risky, as it invested in government debt of the emerging markets of the day, including the United States. To some British investors, the intention of deploying capital to investments outside the domestic economy seemed to go against British interests and might potentially contribute to an economic decline. However, this view was doubted by other investors who saw the potential growth emerging markets had to offer, and were eager to capitalize on these opportunities while diversifying their overall portfolios.

Closed-end funds were introduced in the U.S. starting in the 1920s, and have been around ever since. Today, each closed-end fund has a fixed number of shares that are traded on the open markets. Closed-end funds that are publicly traded are registered both under the Securities Act of 1933 and the Investment Company Act of 1940.

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Loreen M. Gilbert, CIMA, AIF, CRC, CLTC – President, WealthWise Financial Services
Blue Vault
July 6, 2016

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