The first ETF turns 30 this week. He launched a revolution in low-cost investing

(Book’s extract, “Shut up and keep talking: Lessons in life and investing from the floor of the New York Stock Exchange,” by Bob Pisani.)

Thirty years ago this week, State Street Global Advisors launched Standard & Poor’s Depositary Receipt (SPY), the first US-based Exchange Traded Fund (ETF), which tracked the S&P 500.

Today it is known as SPDR S&P 500 ETF Trust, or simply “SPDR” (pronounced “Spider”). It is the largest ETF in the world with over $370 billion in assets under management, and it is also the most actively traded, regularly trading over 80 million shares daily with north dollar volume. $32 billion a day.

How ETFs differ from mutual funds

Holding an investment in an ETF structure has many advantages over a mutual fund.


  • Can be traded intraday, just like a stock.
  • Has no minimum purchase requirement.
  • Annual fees are lower than those of most comparable mutual funds.
  • Are more tax efficient than a mutual fund.

Not a good start

For a product that would ultimately change the world of investing, ETFs got off to a bad start.

Vanguard founder Jack Bogle launched the first index fund, the Vanguard 500 Index Fund, 17 years earlier, in 1976.

The SPDR ran into a similar problem. Wall Street was not in love with a low-cost index fund.

“There was enormous resistance to change,” Bob Tull, who was developing new products for Morgan Stanley at the time and was a key figure in the development of ETFs, told me.

The reason was mutual funds and brokers quickly realized that there was little money in the product.

“There was a small asset management fee, but the street hated it because there was no annual shareholder servicing fee,” Tull told me. “The only thing they could charge was a commission. There was also no minimum amount, so they could have gotten a $5,000 ticket or a $50 ticket.”

It was retail investors, who started buying through discount brokers, who helped the product take off.

But success took time. In 1996, when the Dotcom era began, ETFs as a whole had just $2.4 billion in assets under management. In 1997, there were barely 19 ETFs. In 2000, there were still only 80.

So what happened?

The right product at the right time

Although it started slowly, ETF activity came at the right time.

Its growth was aided by the confluence of two events: 1) the growing realization that indexing was a superior means of owning the market compared to stock picking; and 2) the explosion of the Internet and the Dotcom phenomenon, which drove the S&P 500 up an average of 28% per year between 1995 and 1999.

In 2000 ETFs had $65 billion in assets, in 2005 $300 billion and in 2010 $991 billion.

The Dotcom collapse slowed the entire financial industry, but within a few years the number of funds started to rise again.

The ETF business quickly expanded beyond equities, to bonds and then to commodities.

On November 18, 2004, StreetTracks gold stocks (now called SPDR Gold Stock, symbol GLD) has become public. This represented a leap forward in the spread of gold more widely. The gold was kept in chests by a guard. It tracked gold prices well, although as with all ETFs there were fees (currently 0.4%). It could be bought and sold on a brokerage account, and even traded intraday.

CNBC’s Bob Pisani on the floor of the New York Stock Exchange in 2004 covering the launch of the StreetTRACKS Gold Shares ETF, or GLD, now known as SPDR Gold Trust.

Source: CNBC

Staying in low-cost, well-diversified funds with low turnover and tax advantages (ETFs) gained even more adherents after the great financial crisis of 2008-2009, which convinced more investors than trying to beat the markets was nearly impossible, and that -cost funds ate away all the above-market returns that most funds could claim to make.

ETFs: ready to take over from UCITS?

After a pause during the Great Financial Crisis, ETF assets under management took off and more than doubled roughly every five years.

The Covid pandemic has pushed even more money into ETFs, the vast majority into index-based products like those linked to the S&P 500.

From a meager 80 ETFs in 2000, there are approximately 2,700 ETFs operating in the United States, worth around $7 trillion.

The mutual fund industry still has significantly more assets (about $23 trillion), but that gap is rapidly closing.

“ETFs are still the largest portfolio of growing assets in the world,” said Tull, who has created ETFs in 18 countries. “It’s the only product regulators trust because of its transparency. People know what they’re getting the day they buy it.”

Note: Rory Tobin, global head of ETF SPDR business at State Street Global Advisors, will be on the halftime report Monday at 12:35 p.m. and again at 3 p.m. Monday on


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