Investment Trusts

The stockholder in the usual industrial concern generally has little difficulty in assuring himself of the tangible properties back of his engraved certificates. A Pennsylvania Railroad stockholder can visit almost any eastern railroad station and watch his stock come clanging in. A Radio Corporation stockholder can hear his stock coming out of any cigar-store loudspeaker. Yet the type of corporation which is the outstanding feature of today's investment world has physical assets consisting chiefly of office equipment. This corporation is the Investment Trust--a company formed to trade in the stocks of other companies, a company whose stock is backed only by other stocks. Yet this paper house built on a paper foundation is stronger than many a structure based on stone and steel. For as meat is a commodity to the butcher, as money is a commodity to the banker, so stocks and bonds are commodities to the Investment Trust, and dealing in them is no more fantastic than dealing in sides of beef or bags of bullion.

The investor in an Investment Trust, in effect, turns his money over to a group of experts who have the advantage of a thorough market knowledge and of handling sums ranging from three to five hundred million dollars. Such an investor is letting men like Simon William Straus, the Seligmans, Arthur Cutten, Fred Fisher, Walter Chrysler, invest his money for him. Investors in U. S. investment trusts usually do not know exactly where their money is being used (English investment trusts are more considerate); they are simply trusting the Trust. Perhaps the best analogy to an Investment Trust would be a hypothetical bank that had no restrictions on what it could do with the depositors' money. Funds invested in Investment Trusts may well yield 10% or more, may also yield nothing at all. Prior to 1925 there were only 29 U. S. investment trusts; at present there are some 200.

Petroleum Corp. Outstanding among recent Investment Trusts is Petroleum Corp. of America, the long-rumored oil securities company last week formally announced by Blair & Co. Petroleum Corp. offered 3,250,000 shares at $34, a total capitalization of $110,500,000. Prominent among its executives are Director Arthur W. Cutten and Board Chairman Elisha Walker, first partner of Blair & Co. (TIME, Dec. 10). Other famed directors are Halstead G. Freeman, president of Chase Securities, Charles Hayden, of Hayden, Stone & Co., E. F. Hutton, chairman of Postum Co., Inc. President is John H. Markham, Jr., head of the Exchange Bank of Tulsa, Okla., an independent oil opera tor. Petroleum Corp. will make its initial investments in Prairie Oil & Gas and Prairie Pipe Line--the two oil companies whose Rockefeller holdings (TIME, Dec. 10) were recently purchased by Blair & Co.

Motor Trust. With the Cutten-Blair & Co. Petroleum trust definitely established, rumors last week centered about the formation of an automotive trust in which the names of Mr. Cutten and a "progressive Wall St. banking house" were freely coupled. Two other great names were added--Fred J. Fisher, Vice-President of General Motors and Walter P. Chrysler, head of Chrysler Motors. This quartet was credited with the planning of an Investment Trust with a capital of from $500,000,000 to $700,000,000, formed to operate exclusively in automobile securities. Upon this automotive rumor was built an even grander story of a billion-dollar trust, backed by Mr. Cutten and his associates, and entering many key industries with a specialized investment trust for each. Thus, Petroleum Corp. would be the oil section and the proposed motor trust the automobile section of a "circular" trust in many fields and on gigantic scales.

Seligman Trust. Thus the specialty Investment Trust, actual and rumored. Last month saw also the formation of a general Investment Trust, a smaller, more compact example of the species. This was the Tri-Continental Corp. sponsored by the house of J. & W. Seligman, famed international bankers. It is capitalized at $50,000,000, has no specific field of interest. It has offered 1,000,000 shares of no par common stock at $27; a $25,000,000 issue of 6%, cumulative preferred stock with warrants at $104.

The Seligman family is one of four Manhattan Jewish families (along with the Schiffs, the Lewisohns, the Warburgs) particularly famed for philanthropic as well as for financial activities. The house was founded in 1848 by Joseph Seligman, U. S. immigrant from Bavaria in 1835. Becoming wealthy as merchant and importer, Joseph Seligman entered the banking business, sent for his seven brothers. Since then there have always been several Seligmans in the Seligman House. Present representatives of the family in the firm are Henry, Jefferson and Walter Seligman. Perhaps the most distinguished in the firm is shy, quiet, poetry-loving Frederick Strauss,* honorary Phi Beta Kappa member, so little given to publicity that Who's Who does not include his name.

Other Investment Trusts. Among other recent Investment Trusts should be listed:

Goldman Sachs Trading Corp... ($100,000,000)

Selected Industries, Inc ($90,000,000)

Prudential Investors, Inc ($75,000,000)

North American Aviation ($30,000,000)

S. W. Straus & Co ($10,000,000)

*Not to be confused with S.W. Straus, also in the Investment Trust field.