Abstract: The State's Assumptions about Mutual Funds: A Corrective History, 1929-1932

Emily L. Martz


Historians and members of the public typically assume that officers within the mutual fund industry have prioritized sales since they created their first funds in 1924. The Securities and Exchange Commission's often cited report on the industry's early operations is largely responsible for this categorization; the report described the industry as one that operated according to a culture of sales, one in which sales dominated the principals' activities. In this paper I correct that perception and demonstrate that the founders of the earliest open-end investment companies (as mutual funds were then called) actually failed to market their companies. Indeed, the society within which some officers lived and worked precluded them from actively selling shares of their fund. Many others created their company as a tool to support another business rather than as a profitable venture unto itself, and hence sales occurred as a consequence of other efforts rather than because of organized marketing campaigns. By the time the SEC wrote its report, sales were a major part of many mutual fund operations; however, through the early 1930s, officers did little selling.