This paper traces the development of investment privatization funds (IPFs) in Russia and the Czech Republic following the completion of their mass privatization programs. It examines the role that was assigned to IPFs by the architects of mass privatization programs and compares this with the actual development of IPFs in the two countries. The tentative findings suggest that, contrary to expectations, the majority of IPFs have not developed into viable financial intermediaries or key agents of corporate governance. While IPFs faced markedly different constraints in the two countries with respect to the ownership structure of firms and the economic and legal environment in which they had to operate, some important commonalities emerge. Most importantly, the development of IPFs into portfolio managing investment funds appears to have been hampered by a lack of regulatory oversight and investor protection that has undermined the credibility of capital markets and restricted the funds' ability to raise new capital on the market. In response, many IPFs have gone out of business, while the remaining funds have been transformed into holding companies or have sought shelter in financial groups. The paper concludes by stressing the need for additional comparative research on the impact of mass privatization for the development of viable capital markets.