Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-11-27
INVESTMENT TRUSTS READJUST
PORTFOLIOS FOR NEXT YEAR
Majority of Finance Corporations Are
Reported to Have Sold Out Their
Rail Stocks Recently.

| that, except for limited number OF
trusts that were set up primarily to
deal in railroad stocks, the majority OF
finance corporations have comparatively
few carrier shares. These are limited
to the three or four that would be able
to pay dividends even with another year
of depression. There has also been a
| tendency to get out of the securities OF
the newer public utility holding COM
panies and into those Of the long estab-
lished power and light corporations
One OF the factors responsible for the
shrinkage in the assets of investment
trusts has been the large participation
which they made in the common stocks
Of public utility holding companies
The value of such stocks has declined
steadily until it is only a small per-
centage of its original cost. At the
same time dividends on the preferred
shares of the same concerns have been
passed
Since the end of June, there has beer
another revaluation by the public OF
the stocks of both management invest
ment trusts and those of fixed trusts
The rally in securities in June gave a
better aspect to trust company reports
than had been anticipated earlier in
the month. However, when the Sep
TENDER quarter arrived, portfolios had
deprecated materially, so that asset
values generally on September 80 were
the lowest since trust portfolios in this
country were established. It will soon
be time to again set up balance sheets
giving the picture to trust stockholders
at the end Of 1881. Managers of both
classes of trusts are praying for re-
covery in the market during the next
month.
Market Values.
In manY cases, market values of in
vestment trust shares have for over q
year and half been at discount from
liquidating values. Just as there was a
premium paid In 1929 on trust shares
for the factor of management, so there
has been discount in the subsequent
years when results of management have
not been satisfactory to the public that
bought this type of security. 1t Is q
question, therefore, how far In any gen.
eral recovery in the market trust shares
will keep pace with the appreciation in
the portfolios which are back of them
Will these shares continue to lag in
market value in spite of an increasing
momentum in asset value?
Prices for numerous trust common
shares. have been approaching "irre-
ducible minimums." Many of them
that were selling for quite few dollars
are now quoted in terms of cents
Where there is no prior liability in the
form of preferred stock or debenture
| issue, their position is Influenced en-
tirely by the value of the diversified
list of securities underlying them. The
case with companies having senior
issues is different. These are dependent
on the income from the portfolio fol-
the maintenance of interest payments
| and disbursements on preferred stock
Quite few of the companies have beer
| compelled to pass dividends on Their
senior shares. The only reflection sc
far of reduced earnings on trust in
vestments has been In the decline In
the market price Of trust bonds.
Trusts Are Stronger.
The general impression is that there
viii have to be substantial advance
in the average prices of stocks before
there is an appreciate response to this
improvement among the best known OF
the investment trust and fixed trust
| common and preferred shares. From
the standpoint of management and Of
balanced investments the trusts are
more competent and stronger than they
were two years ago. If the public haC
bought their shares at their liquidatins
and not their market value, in 1929
there would have been little cause 70,
complaint today, for the element oil
diversification has proved itself as q
; factor in limiting losses in general
market decline.
lCopyright. 1917