The rise of professional asset management: The UK investment trust network before World War I

Sotiropoulos, Dimitris P.; Rutterford, Janette and Van Lieshout, Carry (2021). The rise of professional asset management: The UK investment trust network before World War I. Business History, 63(5) pp. 826–849.

DOI: https://doi.org/10.1080/00076791.2019.1656197

Abstract

This paper analyzes the network of UK closed-end investment trust companies, the early pioneers of diversification before World War I, compiling data from different original sources with regard to their directors’ backgrounds and their characteristics as listed companies. Our results reveal that the majority of these early asset managers were merchants, bankers, lawyers, or accountants. The structure of the network is centralized around a few firms with high board sizes and a few directors with many interlocking directorships within the sector. This is a purely structural effect and cannot be explained by individual firm or director characteristics. Our results also show that investment trusts could not be grouped according to their performance. This means that interlocking directorships were equally possible between good and weak performing investment trusts, suggesting that successful asset management was due to team work and a result of collective decision making at board level.

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