Robert L. Hill

English

Research Papers in Economics

Survey of Common Trust Funds, 1956
THE AGGREGATE MARKET VALUE of the future surveys the reporting period of funds
investment holdings of 243 common trust
funds at the end of 1956 was $1,974
million. Holdings increased $106 million
during the year, or less than half the growth
in the preceding 12-month period. The
smaller expansion in 1956 resulted from
smaller additions from new participations,
larger withdrawals, and from a net decline
in the market value of investments in con-
trast with appreciation in 1955. These are
the findings of the second Annual Survey
of Common Trust Funds conducted by the
Board of Governors of the Federal Reserve
System as part of a program to provide in-
formation concerning the uses made of
principal accumulations of savings.
1
The 1956 Survey was expanded to in-
clude all common trust funds operated by
banks and trust companies in the United
States and possessions administered under
subsection (c) of Section 17 of Regulation
F; complete coverage was obtained. Funds
not included in the 1955 Survey—the 24
funds in operation less than 12 months on
January 31, 1956, and two Hawaiian funds
—have been included in the 1956 Survey.
The terminal date for each fund in the
current Survey was the valuation date fall-
ing in the fourth quarter of the calendar
year. Accordingly, figures for 51 funds that
reported as of their January 1956 valuation
date in the 1955 Survey cover only a nine-
month period in the current Survey. In
1 This article was prepared by Robert L. Hill of the
Board's Division of Bank Operations with the collab-
oration of the Division of Examinations. Results of
the first Survey appeared in the BULLETIN for August
1956, pp. 800-805.
other than new ones will cover 12 months.
Holdings of funds that began operations
during 1956 are included in tabulations of
end-of-year figures and also in the tabula-
tions of purchases and sales; the cash and
United States Government nonmarketable
securities contributed by the participating
accounts on the starting date of the new
funds are included in the tabulations of net
additions to principal.
For classification purposes, a discretion-
ary common trust fund is one in which all
investments are made in the discretion of
the trustee. Such investment power may
be derived from a State statute (e.g., based
on the prudent-man principle) or from the
instruments creating the individual fiduciary
accounts investing in the common trust
fund. A legal common trust fund is one
in which all or part of its investments are
restricted to specific investments or classes
of investments designated by a State statute
as legal for the investment of trust funds,
or one in which investment in nonlegal
securities is limited by statute to a given per-
centage of the fund. The limitations on
their investments in nonlegal securities range
from 30 per cent to 50 per cent of the mar-
ket value (in one State, inventory value) of
the fund.
2 The majority of the funds classi-
2 There are only two funds in the Survey operating
under statutes requiring a minimum of 50 per cent of
the investments to be in legal investments. These
funds are classified as legal although technically 50
per cent of such funds may be invested in the dis-
cretion of the trustee; to insure compliance with the
law, over half of the assets of such funds are held
in legal investments.
622
Federal Reserve Bulletin: June 1957SURVEY OF COMMON TRUST FUNDS, 1956 623
TABLE 1
INVESTMENT HOLDINGS, PURCHASES, AND SALES OF COMMON TRUST FUNDS, 1956
1
[Dollar amounts in millions]
Type of holding
2
Holdings, at
end of 1955
At
market
value
As per-
centage
of total
Cost of
purchases
and other
acqui-
sitions
Proceeds
from sales
and
redemp-
tions
Holdings, at
end of 1956
At
market
value
As per-
centage
of total
Total holdings (including principal cash)
Bonds, notes, and certificates—total...
U. S. Government—total
Marketable, maturing:
One year or less
After one year
Nonmarketable
State and political subdivision ,
Domestic corporate—total ,
Manufacturing ,
Public utility
Railroad
Other ,
Other*
Preferred stocks—total
Manufacturing
Public utility
Railroad
Financial
Trade
Other ,
Common stocks—total
Manufacturing
Public utility
Railroad ,
Financial ,
Trade
Other
Real estate loans
Savings accounts
Principal cash ,
$1,868.7
712.0
322.2
4.7
135.0
182.5
31.2
338.5
79.9
166.0
47.1
45.5
20.0
214.1
108.1
87.8
4.9
5.8
7.2
.3
910.9
561.3
189.5
13.8
93.6
42.5
10.4
20.0
.6
11.1
100.0
38.1
17.2
.3
7.2
9.8
1.7
18.1
4.3
8.9
2.5
2.4
1.1
11.5
5.8
4.7
.3
.3
.4
(
4)
48.7
30.0
10.1
.7
5.0
2.3
.6
1.1
.6
$357.6
226.1
85.2
35.1
42.1
8.0
14.8
109.0
30.9
52.9
13.4
11.7
17.2
39.2
19.9
17.2
.6
.7
.8
(
5)
80.4
48.3
17.0
1.6
7.9
3.9
1.6
11.5
.3
$244.9
160.2
121.4
34.3
54.2
32.9
2.0
26.4
12.5
9.4
1.9
2.5
10.4
18.6
13.3
3.4
.2
.5
.9
.3
61.4
41.6
8.2
.3
6.9
3.0
1.5
4.5
.2
$1,974.4
735.1
278.5
5.7
115.3
157.5
39.4
391.4
93.4
192.8
54.3
50.9
25.8
209.2
101.4
91.5
4.6
5.5
6.2
(
5)
985.1
626.0
201.0
14.6
91.8
39.1
12.6
27.0
.7
17.4
100.0
37.2
14.1
.3
5.8
8.0
2.0
19.8
4.7
9.8
2.8
2.6
1.3
10.6
5.1
4.6
.2
.3
.3
(
4)
49.9
31.7
10.2
.7
4.6
2.0
.6
1.4
.9
1 Survey of common trust funds operated under Sec. 17(c) of
Regulation F of Board of Governors. Except for funds that reported
as of a January 1956 valuation date in the 1955 Survey and funds be-
ginning operation during 1956, data are for 12 months; terminal dates
range from Oct. 1, 1956, through Dec. 31, 1956. The 1955 figures
shown above include data for funds excluded from end-of-period
figures published in the 1955 Survey (funds in operation less than
12 months on Jan. 31, 1956, and funds in United States possessions)
and minor statistical revisions.
2 Nonmarketable U. S. Government securities are valued at cost
and other holdings at market value. Purchases are shown at cost
and sales at proceeds realized. Conversions and exchanges of
securities are treated as sales of securities surrendered and purchases
of securities received. Stock rights held at beginning or end of
reporting period are included in appropriate investment category at
market value. Proceeds from sales of such rights are included in
proceeds from sales of securities during period. Details may not
add to totals because of rounding.
3 Quasi-Government agencies, and Canadian government and
corporations. 4 Less than .05 of one per cent.
5 Less than $50,000.
fied as legal in this Survey are of the limited
type. A special common trust fund is one
that is restricted by plan or institutional pol-
icy to one type or class of investment, i.e.,
fixed-income investments, bonds, or com-
mon stocks; it may be either discretionary
or legal.
INVESTMENT ACTIVITY
Gross investment transactions of common
trust funds, shown in Table 1, totaled $603
million in 1956 as compared with $578 mil-
lion in 1955; purchases were practically
unchanged, but sales and redemptions
were larger than in the preceding year.
There was a decline in the activity or turn-
over of the aggregate portfolio, although
bond turnover was greater than during the
earlier period.
3 The higher turnover of
3 For this purpose, activity or turnover is measured
by dividing the average of gross purchases and gross
sales by the average of holdings at the beginning and
end of the reporting period.
Federal Reserve Bulletin: June 1957624 FEDERAL RESERVE BULLETIN • JUNE 1957
bonds resulted largely from the practice of
using United States Government securities
as temporary investments; however, there
also appeared to be some movement out of
United States Government securities into
other classes of investment, as indicated by
the estimated distribution of new money
coming into the funds during 1956.
The net amount of new money coming
into the common trust funds during 1956
TABLE 2
MARKET VALUE OF INVESTMENT HOLDINGS OF COMMON TRUST FUNDS, BY TYPE OF FUND, 1955-56
1
[In millions of dollars]
Type of holding
2
Total holdings
Bonds, notes, and certificates—
total
U. S. Govt
State and political subdivi-
sion ,
Domestic corporate ,
Other3
Stocks—total.
Preferred...
Common...
Real estate loans and savings
accounts
Principal cash
Factors affecting change during
year:
Net additions to principal
funds
Net decline in market value of
investments
Net realized capital gains
All funds
1956
1,974.4 1,868.7
735.1
278.5
39.4
391.4
25.
3 1 1,194.
209.2
985.
27.7
17.4
1955
712.0
322.2
31.2
338.5
20.0
,125.0
214.1
910.9
20.6
11.1
In-
crease,
or de-
105.7
23.1
-43.7
8.2
52.9
5.8
69.3
-4.9
74.1
7.1
6.3
118.9
32.6
19.4
Diversified discretionary
funds
1956
1,565.2
532.3
200.9
21.2
292.1
18.1
1,005.9
161.0
844.8
15.9
11.1
1955
1,486.0
518.7
235.8
18.4
249 A
15.2
947.9
166.3
781.6
12.8
6.7
In-
crease,
or de-
79.2 294.5 292.2
13.5 143.8 145
-34.9
2.8
42.7
2.9
58.
-5.3
63.3
3.1
4.4
80.3
17.1
15.9
Diversified legal
funds
1956
63.6
5.0
69.9
5.3
0 140.1
44.7
95.5
5.3
5.2
1955
.9
74.0
4.4
64.3
3.2
138.9
45.7
93.2
4.1
3.2
In-
crease,
or de-
2.3 104.0 82.5
-2.1
-10.5
.6
5.6
2.1
1.2
-1.0
2.3
1.3
2.1
11.8
12.6
3.0
Special funds
Discretionary
1956
50.4 41
8.8
10.9 7.3
28.623.4
2.0 1.2
46.4 36.8
.1
.7
2.7
43.7 35
6.3
.9
1955
In-
crease,
or de-
21.5 10.7
9.2
-.5
3.6
5.3
9.6
1.5
8.0
2.7
.1
23.2
2.1
Legal
1956
8.6
5.2
2.3
.8
.4
1.9
.8
1.1
.1
.1
1955
7.9
6.2
3.1
1.1
1.5
.4
1.4
.9
.5
.3
In-
crease,
or de-
2.8
2.5
2.1
1.2
-.8
-.1
.5
-.1
.6
-.2
3.6
1 See Table 1, note 1.
2 See Table 1, note 2.
3 See Table 1, note 3.
4 Less than $50,000.
TABLE 3
SIZE DISTRIBUTION OF COMMON TRUST FUNDS, 1956 *
[Dollar amounts in millions]
Size of fund
(total holdings,
in millions of dollars)
2
All funds
Under 1
1-2
2-5 ..
5-10
10-25
25-50
50-100
All
funds
Number
243
51
43
58
37
35
12
7
Total
holdings
$1,974.4
24.5
63.5
194.1
261.4
546.1
406.3
478.6
Diversified
discretionary funds
Number
156
22
27
43
25
20
12
7
Total
holdings
$1,565.2
10.7
41.8
142.2
183.9
301.8
406.3
478.6
Diversified
legal funds
Number
54
14
10
11
7
12
Total
holdings
$294.5
7.3
14.2
40.6
45.7
186.8
Special
funds
 !
Number
33
15
6
4
5
3
Total
holdings
$114.7
6.5
7.4
11.4
31.8
57.6
1
i See Table 1, note 1.
2 See Table 1, note 2.
Federal Reserve Bulletin: June 1957SURVEY OF COMMON TRUST FUNDS, 1956 625
was $119 million, $26 million less than in
the preceding period. It is estimated that
55 per cent of this new money was invested
in bonds, 16 per cent in common stocks,
17 per cent in preferred stocks, and 6 per
cent in real estate loans and savings ac-
counts, while 5 per cent was held in cash.
Compared with 1955, this represented a
decline in the proportion invested in bonds
and an increase in cash holdings, real estate
loans, and savings accounts; proportions in-
vested in preferred and common stocks re-
mained approximately the same.
GROWTH
New funds were started during 1956 in five
States—Arizona, Arkansas, North Dakota,
Rhode Island, and South' Carolina—that
previously had no common trust funds.
Throughout the United States 21 new funds
were created during the year, as shown in
Table 4; their aggregate holdings at the year-
TABLE 4
STARTING DATES OF COMMON TRUST FUNDS
Year
Total
1956
1955
1954
1953
1952
1951
1950
1949
1948
1947
1946
1945
1944
1943
1942
1941
1940
1939
1938
1937
Total
243
21
25
23
35
20
20
22
14
8
16
3
12
6
1
5
5
4
2
1
Discretionary
Di-
versi-
fied
156
8
14
13
23
12
15
11
12
7
12
2
9
4
1
3
5
4
1
Special
Fixed-
income
invest-
ment
13
3
2
2
4
1
Com-
mon
stock
11
1
3
1
3
2
1
Legal
Di-
versi-
fied
54
5
5
6
5
5
4
11
2
1
3
1
3
1
1
Special
Fixed-
income
invest-
ment
8
4
1
1
1
Com-
mon
stock
1
end amounted to $20 million. On December
31, 1956, there were 243 funds operating in
40 of the 49 jurisdictions (47 States, the Dis-
trict of Columbia, and Hawaii) that permit
common trust funds. The number of fiduci-
ary accounts that have been invested in these
common trust funds increased approxi-
mately 8,000 during the year and totaled
nearly 93,000 at the end of the period.
The size of individual funds, in general,
changed little during 1956, although the
market value of a larger number of funds
decreased during 1956 than in 1955. This
was due largely to the decline in market
value of fixed-income assets as evidenced by
the relatively larger decrease in market value
of legal funds. Most legal funds are re-
stricted by State law in the amount that may
be invested in common stocks; on the other
hand, discretionary funds are without statu-
TABLE 5
COMMON TRUST FUNDS AND THEIR INVESTMENT
HOLDINGS, BY CLASS OF BANK, 1956
 x
Class of bank
All banks, total
Diversified discretionary.
Diversified legal
Special
State member banks, total..
Diversified discretionary.
Diversified legal
Special
National banks, total ,
Diversified discretionary.
Diversified legal
Special ,
Insured nonmember banks, total.
Diversified discretionary
Diversified legal
Special
Noninsured nonmember banks, total.
Diversified discretionary
Diversified legal
Special
Num-
ber of
funds
243
156
54
33
97
60
31
6
108
76
19
13
21
10
4
7
17
10
7
Num-
ber of
banks
2
195
152
53
24
70
58
30
4
95
74
19
11
17
10
4
5
13
10
4
Market
value of
holdings
 3
(in mil-
lions of
dollars)
1,974
1,565
294
115
1,286
1,005
253
29
460
385
38
38
31
21
4
6
197
154
43
1 See Table 1, note 1.
2 Details do not add to totals because some banks operate two or
more funds.
3 See Table 1, note 2.
Federal Reserve Bulletin: June 1957626 FEDERAL RESERVE BULLETIN • JUNE 1957
tory limitation. In the aggregate, common
stocks accounted for 32 per cent of the
assets of diversified legal funds as compared
with 54 per cent of the assets of diversified
discretionary funds.
In recent years eight banks have estab-
lished "dual funds," one of which is invested
primarily in fixed-income assets and the
other in common stocks. Such arrange-
ments permit participation in either or both
funds in accordance with the needs and
requirements of the individual fiduciary
accounts. Dual funds are classified as
special funds in the Survey.
DISTRIBUTION
During the two years covered by the Sur-
veys, the number of common trust funds
increased in all geographic sectors. During
1956 the largest numbers of new funds—
seven and five—were started in Pennsyl-
vania and California, respectively.
Approximately 60 per cent of the com-
mon trust fund assets are held by funds in
the Boston, New York, and Philadelphia
Federal Reserve Districts; these funds
comprise 44 per cent of the total number
of funds, as shown in Table 6. In a dollar-
size ranking of States, Pennsylvania is
largest, with common trust fund assets
totaling $567 million; New York second,
with $430 million; and Massachusetts third,
with $175 million. These three States rank
in the same order in terms of number of
funds—with 38, 37, and 17 funds, respec-
tively, as shown in Table 7.
TABLE 6
TYPES OF COMMON TRUST FUNDS AND INVESTMENT HOLDINGS, BY FEDERAL RESERVE DISTRICT, 1956
 1
[Dollar amounts in millions]
Federal Reserve
district
Number of funds
Total
Diver-
sified
dis-
cre-
tion-
ary
Diver-
sified
legal
Special
Dis-
cre-
tion-
ary
Legal
Total
hold-
ings
2
Bonds, notes, and certificates
Total
U.S.
Gov-
ern-
ment
State
and
polit-
ical
sub-
divi-
sion
Cor-
po-
rate
All
other
Stocks
Total Pre-
ferred
Corn-
Real
estate
loans,
etc.
Prin-
cipal
cash
All districts..
Boston
New York...
Philadelphia..
Cleveland
Richmond...
Atlanta
Chicago
St. Louis....
Minneapolis. .
Kansas City..
Dallas
San Francisco
243
30
42
34
20
28
16
21
11
5
11
6
19
156
29
21
15
9
20
12
14
7
6
13
54
1
20
17
6
24 $1,974.4 $735
1
1
3
3
3
1
3
1
2
2
I
1
235.1
447.5
501.4
189.7
144.5
46.9
92.9
116.6
13.3
40.9
21.1
124.5
78.9
210.0
141.3
47.7
17.8
42.6
45.2
6.0
13.7
6.7
44.3
$278.5
38.4
59.0
79.4
23.1
18.9
5.1
16.7
9.5
1.8
6.7
3.3
16.6
$39.4 $391.4
37.4
143.5
40.0
33.0
$25.8 $1,194.3 $209.2 $985.1
()
17.2
20.3
1.1
.2
.2
.2
26.7
12.0
24.2
35.2
4.1
5.5
3.3
26.3
3.1
7.5
4.7
4.4
.9
.4
1.5
.2
()
1.4
.2
1.4
153.3
232.2
354.5
106.9
83.0
27.7
49.3
67.9
7.
21.0
13.7
77.8
10.5
25.3
111.9
24.8
9.5
7.2
5.6
1.9
.4
2.6
2.5
7.0
142.8
206.9
242.6
82.0
73.5
20.5
43.7
66.0
6.8
18.3
11.2
70.8
$27.7
.7
1.5
12.6
1.3
.4
3.4
6.0
.5
1.2
$17.4
2.2
3.8
5.6
2.0
1.2
.1
.5
.1
.3
.3
1 See Table 1, note 1.
2 See Table 1, note 2.
3 Less than $50,000.
Federal Reserve Bulletin: June 1957SURVEY OF COMMON TRUST FUNDS, 1956 627
TABLE 7
STATE DISTRIBUTION OF COMMON TRUST FUNDS, BY TYPE, 1956
x
State, with year of
legalization of common
trust funds
40 States, incl. D. C. and
Hawaii.
Alabama (1943)
Arizona (1941)
Arkansas (1947)
California (1947)
Colorado (1947)
Connecticut (1943)
Delaware (1935)
Dist. of Columbia (1949)....
Florida (1941)
Georgia (1943)
Illinois (1943)
Indiana (1937)
Kentucky (1938)
Maine (1951)
Maryland (1945)
Massachusetts (1941)
Michigan (1941)
Minnesota (1937)
Missouri (1940)2
Nebraska (1953)
Number of funds
Total
243
3
1
1
9
6
9
3
4
4
5
6
6
2
3
7
17
5
4
7
1
Diver-
sified
discre-
tionary
156
2
1
1
7
3
9
3
2
3
5
6
2
3
5
17
5
2
4
1
Diver-
sified
legal
54
2
6
Special
Discre-
tionary
24
2
2
1
1
3
Legal
9
1
.......
2
1
State, with year of
legalization of common
trust funds
New Hampshire (1953)...
New Jersey (1945)
New York (1937)
North Carolina (1939)...
North Dakota (1955)
Ohio (1943)
Oklahoma (1949)
Oregon (1951)
Pennsylvania (1939)
Rhode Island (1956),
South Carolina (1955)....
Tennessee (1953)
Texas (1947)
Utah (1951)
Vermont (1933)
Virginia (1944)
Washington (1943)
West Virginia (1943)
Wisconsin (1943)
Hawaii (1947)
Number of funds
Total
2
6
37
7
1
8
2
1
38
2
1
6
6
1
1
8
3
1
5
4
Diver-
sified
discre-
tionary
1
2
17
5
7
2
1
12
2
......
6
1
1
7
3
1
3
Diver-
sified
legal
1
4
19
1
1
19
1
Special
Discre-
tionary
1
2
4
2
1
1
4
Legal
3
1
i See Table 1, note 1.
2 By court decision; legislation was enacted in 1955.
Federal Reserve Bulletin: June 1957

Survey of common trust funds, 1956

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Survey of common trust funds, 1956

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