Investment trusts were the first investment vehicles to enable middle class investors to easily and cheaply diversify their holdings.
Using 150 years of monthly data, on hundreds of trusts, we analyse how they have moved from having mainly idiosyncratic risk to being heavily exposed to systematic risk.
We find that trusts which were more exposed to the market average had less potential to earn excess returns, but were more likely to survive. We argue that trusts have promoted financial democratisation, allowing small investors to earn high returns on their savings, and have generally been a stabilising influence with many of the original trusts still in existence.
Gareth Campbell is a Senior Lecturer at Queen’s University Belfast, where he is the Programme Director of the BSc Finance degree. His research has focused on financial history, particularly on the growth and fluctuations of the equity markets during the Victorian era. He has published in all of the leading journals in this field, including the Journal of Economic History, Economic History Review, and Business History Review.
