Go active or stay passive: investment trust, financial innovation and diversification in Belgium's early days

Jan Annaert, Gertjan Verdickt

Research output: Contribution to journalArticleResearchpeer-review

2 Citations (Scopus)


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.

Original languageEnglish
Article number101378
Number of pages17
JournalExplorations in Economic History
Publication statusPublished - Jan 2021


  • Diversification
  • Financial innovation
  • Investment trusts
  • Investor behavior

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