I’d like to cover some history, since you’ve covered some history yourself. You’ve seen a lot of things go by. Let’s just start with the mutual fund industry. Why do we have mutual funds in the first place? Who came up with the idea, and why?
… The first actual mutual fund, Mass[achusetts] Investors Trust, was started in 1924. What makes the industry go is the common sense behind it: I would say, number one, diversification — very underrated benefit; number two, efficiency; and number three, for those days, relatively low cost; and number four — I always put this last — management, because management cannot add value, but people somehow feel more comfortable with management looking over their investments.
In those days, by the way, the typical mutual fund was very much like an index fund. They were managed, but they tracked the market for years and years. …
… The first mutual funds were essentially index funds that allowed an investor that didn’t have a lot of money to buy into a fund and therefore diversify, because these were baskets of mini-stocks.
Right. And it was fairly efficient, and it was fairly long term, and it’s focused, the original mutual fund. So they weren’t doing all the trading like they’re doing today. They bought, basically, a basket of blue-chip stocks. …
It began also as a business of trusteeship. Many of the original mutual funds had nothing to do with the marketing of their shares. Firms were out there that sold mutual fund shares and made a commission on it, but they did the buying and selling. We didn’t even think about marketing.
You started a fund, middle-of-the-road fund. They all were in those days, in the late ’20s and early ’30s and into the ’40s and really up to the ’50s. And so they were run by trustees who felt a certain sense, I think, of fiduciary duty to their investors. Marketing was not in the middle of the picture. Marketing [was] peripheral, even if the manager controlled the marketer.