Eddie Who?
For a man who 100 years ago invented something that transformed our world, Edward Leffler is remarkably unknown.
Friend,
The charming shot above is of Looe, Cornwall. It’s remarkable that, aside from the absence of cars, there’s very little clue that it was taken 100 years ago, in March 1924.
Unlike Looe, few things have remained unchanged over the last century. This includes—seamless segue alert—the world of investing. Since 1924, it has been completely transformed, and all the credit goes to a man few have heard of.
In March 1924, Looe denizens were going about their business, trying not to think about the horrors of “The War to End All Wars”, which had ended just five and a bit years earlier, taking with it the lives of 36 of the village’s young men. Simultaneously, over the pond, one of our cousins created something so remarkable and transformative that today, 100 years on, we take it for granted.
His name? Edward Leffler.
It’s hard to find out anything substantive about him. His Wikipedia page is terse. We don’t know when he was born or died or where either event happened.
We know that, after The Great War, Mr Leffler sold pots and pans door to door in the American Midwest. And then, in a pivot so amazing that it makes the transubstantiation of bread and wine into Christ’s body and blood look like a cheap parlour trick, Mr Leffler went from selling saucepans to American housewives to selling salvation to all of us via his humble invention: the mutual fund.
How this transformation came about is, sadly, lost to time.
The mutual fund is born
There is the odd piece on the Interweb about Mr Leffler. But you must search hard; the quote below is in a piece from 1997:
In March, 1924, Leffler helped launch Massachusetts Investors Trust, the first open-end fund. Its charter ensured, in Leffler’s words, that “investors could present their shares and receive liquidating values at any time.”
It’s hard to imagine that such dull words could contain so much dynamite. But suddenly, a mutual fund could do something that was formerly unthinkable: it could grow. It could survive a run of redemptions by replacing the departing shareholders with new ones. It could raise cash from new investors to buy more stocks when they were cheap. And it could spread its costs over a greater asset base, making it more profitable for the adviser to run the fund and cheaper for investors to own it. [bold italics mine]
It’s that last line that contains our salvation. 100 years ago, to get a diverse investment portfolio, you would go to a stockbroker1. He (always a “he”) would craft one holding a range of shares in different companies and charge you enough for the privilege to put the children (his) through private school.
Now, via the humble mutual fund, you and I can invest in superbly diversified portfolios chock full of The Great Companies of The World (GCOTW) for peanuts. And doing so is relatively easy: mutual funds (OEICs, unit trusts, or collective funds) are everywhere.
They are inside your Stocks and Shares ISA and personal pension pots. Massive institutional retirement schemes use mutual funds. They are that strange legacy Aunty Maud left you in the form of a yellowed, parchment-thin unit-trust certificate showing she invested £500 in 1983 with a fund management group that has been bought and sold eight times since.
A twelve-zero (caveated) success
Today, a century on, across the globe, mutual funds hold around US$63 trillion in investor assets. In longhand, that looks like 63,000,000,000,000 (I had to Google it). That’s nearly 30 times the size of the British economy. Like Piers Morgan’s ego, it’s the kind of size that one can’t quite comprehend.
Hold the love for a moment, though. It’s not all nicey-nicey. Mutual funds are prone to negatives:
There are way too many of them. There are around 4,500 in the UK alone. Most investment groups are marketing firms with asset management on the side
A lot of them remain incredibly expensive and need to be, to pay for all that marketing (see above)
“Star” personalities running these funds, egos unchecked, can cause enormous financial loss and distress.
But, in the round, mutual funds have been an enormous force for good, giving us common little folk the ability to share in the profits of world capitalism. 100 years ago, that was strictly for the Rockefellers and Vanderbilts. Now, it’s for us all.
Mr Leffler changed the world in March 1924, and almost no one has heard of him. In a world where complete non-entities dominate popular culture, sometimes it’s nice to trawl through time and recognise those who anonymously changed the world.
Edward G. Leffler, the inventor of the mutual fund, was one such. Mutual respect, bro, as the culture says.
Yes, in the UK, we had investment trusts. But they’ve always been “fringe” and didn’t exist in the USA, so let’s roll with it.