The sun., 1919-04-16
TO FORM A FOREIGN
INVESTMENT TRUST
New Company Would Absorb
Securities Sent Here When
Trade Is Normal.
WILL ISSUE OBLIGATIONS
Capital Is Not 70 Be Less Than
$50, 100000 and Charter
VIII Be Broad.


simulate foreign securities which will
como 10 this country whom trade with
other nations resumes its normal course
and 70 issue rs owA securities against
these foreign obligations. IL being formed
IN New forfs. Il was learned yesterday.
While no nnai steps as regard the or
Eanixation have eeen taken, Il ID under.
stood that Herbert q Houston. former
president OF the Associated Advertising
Clubs Of the World. it 10 be made chair.
man Of the committee which will 70
ahead with the formation Of the corpo-
ration. The plans are the result of Q
meeting held d shorf time ago under the
auspices Of the Cpuneil on Foreign Reia-
lions. at which V whole situation with
regard to fofv j securities was gone
into and the d tanisation Of an invest.
ment trust company urged by Paul N.
Warburg. who addressed the conference
at which bankers from all parts of the
country were represented.
The matters of it's capitalization, In
corporation. scope, personnel, &C.. will be
left. Of course, to the committee which
10 to be named to 70 ahead with It's or
ganization. 1t Is considered likely that
the new company will be capitalized at
not less than $4,000, 900, and that its
charter will be no broad as t6 permit its
engaging in almost any kind of business
and purchasing securities Of almost any
character. That the moment ID exceed
ingly good for a step Of the kind IL the
consensus OF opinion among bankers,
who point out that with the present high
premium on the dollar IN foreign eoun-
tries securities could be bought for
Tar less figure than when exchange once
moro shall reach par, thus insuring a
profit at the very outset, to say nothing
q the appreciation In value OF foreign
HA-surtties which, II Is believed. Will take
place With exchange again on a normal
basis.
Tho matter has been gone into very
thoroughly by bankers and other cap
italists. and It Is said that they are all
heartily in favor Of the plan. Leopold
Frederick, director and treasurer Of the
American Smelling and Refining Com
pany, yesterday issued a statement on
the plan and pointed out ADVANTAGES OF
such an organization and need for i'm
mediate action.
Turning 10 Foreign FisiAs.
Mr., Fredeficks statement In part Is
with the slowing down Of Industrial
activity IN the United states the man
ayers Of the plants whose capacity had
been 80 enormously enlarged during the
war are beginning to turn to the field
OF foreign trade 10 and an outlet for
their products. Foreign nations, espe-
cially those that had to bear the bruht
Of the terrible conflict in Europe, are
looking anxieusly TO the United States
They need cotton. copper, steel. riiachin-
cry and nany other Of our products.
They lack the ready cash and credit to
pay for Their purchases.
THE foreign securities to be sold by
them to our investors and manufacturers
win go n long way toward solving the
problem, and this ma tier has been con-
stantly before the American public since
the gnihg of the armistice. Everybody
agrees that II will be a dlff1cult under
taking to sell foreign securities to the
investor direct. The small wage Garner
especially has hardly been educated
through the Liberty Loan campaigns to
become an investor. and 1t Is too much
to expect that he will Immediately take
kindly to n security which ID liable to
huctuate in price violently and which
may sometimes not pay him Interest
punctually when due.
1T has been suggested several times
during the last few months that there
should be established In the United
States Investment trusts, which institu-
tions would be great factors In the edu-
cation OF the American investor TO the
value OF foreign securities. Paul NJ.
Warbure brought up this question at the
last meeting OF the Council on Foreign
Relations, suggesting that we should not
60 ahead with the establishment d such
An investment trust until the Govern
ment financing and the railroad seeuri-
ties situation were satisfactorily solved.
believe that the absorption OF the
greater proportion OF the nav Victory
Loan will have been accomplished by
the spring Of the coming year. The
railroad securities will require years
before they are back to their pre-war
level. This can only be ACCOMPLISHED
by judiclous legislation and lower In
terest rates.
other Countries Cannot wait.
Europe, Central and South America
and other countries cannot wait that
long and II will be advisable TO begin
the study of the question of investment
trusts In this country at once. The in
vestrnent trusts under discussion are
nothing else than holding companies for
foreign securities. The English. with
their great ramlhcations all over the
world. formed the first Of such organi-
III tho " VI ti'O ioSt
and a number OF them are paying large
dividends. Belgium, Germany and
Switzerland followed suit about twenty
years later. The last named country
especially, on account OF Its neutral
character, Is the home of n number of
these corporations established by groups
of International bankers. In France.
where politics and finance have always
been closely interviewer, the investment
trust Idea has not made any marked
Roadway No foreign loan cab be foated
there without sanction OF the Govern
fnent. Tho blnks have always preferred
70 sell direct to the big and TO the
small investor. The results we're not al
ways gratifying. as unhappy possessofs
Of Russian securities amounting TO bill
lions Of francs can testify.
These investment trusts not only are
purchasers of securities. but members OF
underwriting syndlcates which. in many
cases, yield handsome profits. The great
liberalization In their holdings acts as
a strong safeguard. Besides most Of
these corporations are by their bylaws
prevented from Investing more than 5
per cent. OF the combined share and
bond capital In one particular kind Of
security.
IF properly managed these Investment
trust companies may be made very
profitable. It requires many months to
organize such Investment trusts, and