This new form of credit and financial institutions, which is most developed in the postwar years, although existed before the war. Priority in their development belongs to the United States. Investment company by issuing treasury shares attract funds, which then invest in securities and other industrial corporations. Thus, due to the acquisition of the securities they carry along with other credit and financial institutions funding the various sectors of the economy.
Currently, there are investment companies closed and open types.
Closed-end investment company shares shall release once a certain amount. New customers can buy them only from the former holders of the market price. Open-end investment company, which are called mutual funds, issue their shares gradually, certain portions mainly for new buyers. These shares may be transferred or resold. More convenient form of organization are public companies, since the constant emission allows them all the time to increase your cash capital and thus constantly increase investment in securities of the corporation. In general, the organizational form of investment companies open and closed type is mainly based on joint-stock form.
Feature of investment companies is that buyers of their securities increases the share of financial institutions and commercial and industrial corporations. Each investor in the investment fund is required to pay a commission when buying a stake and management contribution. The fee varies by company and depends on their financial strength and reputation. Come here to buy a ford s max. It should be noted that in the postwar period in the developed capitalist countries, the most rapidly developing public companies (mutual funds).
Development of investment companies is closely linked to the dynamics and magnitude of the securities market. The higher the level of development of the latter, the higher the degree of development of investment companies. The most successful such companies operate in the U.S., Canada, England, Germany and Japan.
The basis of passive investment companies operations are cash proceeds from the sale of its own securities, equity capital, reserve fund, real estate company.
Active operations of investment companies specific and different from similar operations other financial institutions. Principal cash proceeds from the sale of treasury shares, investment companies invest in both types of shares of various corporations and companies. 80% of the assets of investment companies make stocks, and in recent years, moreover, they invest in corporate bonds. There are specialty investments: some companies are focusing their investments in equities, other – in preference, and others – in bonds. In addition, there are industry specialization as companies acquire securities, for example, only the railway companies or engineering, automotive, electronic corporations.
Since the development of investment companies depend on the state of the securities market, mainly shares, frequent fluctuations of shares reflected in the financial condition of the investment companies. Falling stock prices and stock market crashes especially slow development of the latter, and in a number of cases lead to their bankruptcy. This has been observed in the United States in the mid-70s and early 80s.
Investment companies to attract investment wider population, ie small investor, making possible, first, to mobilize substantial funds for investment in the economy, and secondly, to create a certain illusion that everyone can become a shareholder and therefore the owner. To this end, the paper sold at low prices and available for the middle class. In the U.S., such rates have fluctuated in the postwar years, from 2 to 30 dollars usually small investors involved in the stock market boom period when stock prices are rising. However, in terms of deteriorating they generally have large losses. Practice of Western countries shows that the major contributors are still large, individual and collective investors, and monitor the activities of investment companies carry the largest shareholders.
In the 70-ies. any new open-end investment company, which became known as money market mutual funds (Money Market Mutual Funds). This type of investment companies was developed mainly in the U.S. and Canada. Their name is due to the fact that these companies operate in the securities market are mainly short-term securities.
Like other mutual funds, they also issue shares, however, are quite cheap at $ 1 per share. At the same value per share does not change as a result of fluctuations in loan interest, and therefore shares have fixed prices. This led to a flow of customers into such funds, ensuring that they are quite large accumulation. The assets of money market funds in July 1970 in the United States rose to $ 200 billion in 1982, and in the early 90s. they reached the sum of $ 300 billion
Formation of passive operations of these companies is mainly due to the release of cheap shares. Their money they invest in short-term securities: short-term federal bonds (short-term bills), municipal bonds, commercial paper of private corporations, as well as in financial instruments (banker’s acceptance, certificates of deposits of commercial banks). Some funds specialize in this type only the federal government securities.
Money market funds in the United States have a number of benefits compared to other investment funds: they are exempt from the requirements to keep mandatory reserves with the Central Bank (the Fed), do not pay taxes on municipal bonds. In addition, it should be noted another circumstance for a long time interest in their shares was higher than on deposits of commercial banks is 5.25%, and savings and loan associations in deposits, which reached 5.5%. Lower percentage specified in the credit and financial institutions due to the Fed’s rules. This resulted in the end of 70s. a broad cash outflows in money market mutual funds and bank loan – savings associations, which significantly worsened their liquidity. Therefore, since 1982 the United States was conducted deregulation of interest rates, were introduced money market deposit accounts (Money Market Deposit Account), which allowed to adjust the cash savings between commercial banks, the loan – savings associations and money market mutual funds. As a result, funds on deposit accounts increased, the tide of money from money market funds, which significantly reduced the size of their assets. By the late 80′s – early 90-ies. competition to attract funds between banks and funds entered a more stable phase, as the latter used the freedom of the Fed reserve requirements, and the first benefited from federal deposit insurance. At the same time, money market mutual funds began to hold and expand some speculation. So, they began to be used as storage of interest payments and dividends pending reinvestment. In addition, many individuals who themselves dispose of its assets, had the right to open up their own account equity (share accounts). This allowed shareholders fairly fast and free to transfer funds from the accounts of money market mutual funds, depending on the situation on account of investment funds engaged in long-term investments in securities.
Investment companies
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