Evening star., 1932-11-28
BOND TRUST TO BUY
SECONDARY GRADES.
New Group Embarking This
Week Attracted by
Low Prices.
BY CHARLES r. sPEARE.

special Dispatch to the star.
NEW YORK, November 2s.-A group
Of bankers proposes to embark this week
on the investment sea in a new kind o,
craft This will take the form Of q
general management trust whose port.
folio will be exclusively composed ol
secondary grades OF bonds.
The list from which selections are tt
be made includes between IS and 81
different issues Of railroads, public
utilities and industrials.
1t is the purpose of the trust to issue
10-year 6 per cent debentures. Earn
ings will accrue from the interest de.
rived from the coupons on the bonds
selected for the portfolio and. presum.
ably, from such trading profits as re-
suit from taking advantage of market
movements.
In the great era of general manage.
ment trusts and fixed trusts between
1927 and 1929, when, at a conservative
estimate, $4,000, 900, 900 of the public's
money went into the stocks Of such or
ganizations, emphasis was placed pri-
marily on the holding OF equities.
There were q few trusts that made q
wide diversity in the formation of theiI
portfolio, both with respect to the type
Of securities purchased and their geo.
graphical distribution The speculative
craze for common stocks at that time
however. gained most popularity for the
trusts in which Junior shares composed
the highest percentage of ownership.
Appreciation Expected.
1t is their cheapness, from the stand
point Of current market prices, that
now directs attention to the possibili-
les both for income and for apprecia-
tion in the second and third grades OF
corporation bonds. Some of those men
toned in the list of the proposed new
general management trusts are selling
at heavy discounts and give current
income return well In excess Of the
per cent rate on the debentures of the
company. If all goes well, and there
are no further railroad receiverships
the expectations of this new group as
to profits should be fully realized. 1t is
obvious, however, from reading of the
list, that considerable speculative ele-
ment is involved in a number of the
issues that may be purchased.
great deal Of interest has beer
aroused by the possible effect on the
market for the type of bonds to be
purchased by. this group. Such bonds
have had practically no support fol
weeks. During the Spring, when they
touched their lowest prices, dealers anc
speculative operators bought them or
the assumption that they could not &c
much lower even If defaults occurred
This resulted in the doubling and ever
trebling OF quotations for many juniol
railroad bonds. Latterly they have
been working down again steadily, bu1
are still well above the years low
prices. Markets for them are narrow
ana would be sensitive to any consider.
BILE degree of support.
Rail Issues Improve.
The situation in railroad issues ha,
oeen materially improved since they
were at their minimum level, for nei
earnings, out of which interest is paid
nave taken turn for the better. ant
car loadings are more satisfactory thar
a few months ago.
The Sl00,000,000 bond pool formed
last Spring. to which most of the New
YORK banks and large institutions sub
scrioed. has operated almost entirely In
the field Of high-grade issues. Out Of
between s25.000,000 and $40. 1000 OOC
ponds purchased to date, only small
percentage have been Of the type In
Wnich the new general management trust
group intends to specialize. The bank
basis. 1t is understood that it has moi
cashed in any Of the profits resulting
from advantageous purchases when the
market was near the bottom. With the
use Of only a moderate amount of its
authorized capital, it has been able tc
sustain the market for the best quality
bonds SO that today such issues are
quoted around the best prices of the
year. What 1t has done for corpora
tic obligations in the high-rateo
brackets 1t is hoped that the new in
vestment group may be able to dupli-
cate, at least In part, for the secondary
types Of bonds which have been with
out market sponsorship in recent
months.
tCopyright 1887