Three decades to

$3 Trillion

How and why Exchange Traded Funds are the new way to invest.

November-December 1976

The Seed is Sown
In a paper titled “The purchasing power fund: A New kind of financial intermediary” published by Prof. Nils H. Hakansson the idea of a new financial instrument consisting of “supershares” is developed. The underlying assets of these shares would be index funds and would only provide pay-outs for pre-specified levels of market return
1990
Innovation and Regulation, Chalk and Cheese.
  • Hakansson's “Supershares” idea is picked up over a decade later by Le'land O'brien, Rubenstein Associates (LOR). LOR took on this previous theory and wanted to develop their own “SuperTrust” this supertrust allowed institutional investors a way to buy and sell an entire basket of S&P 500 stocks in a single exchange-traded product.
  • After a strong petition by LOR the SEC issued the Investment Company Act Release No. 17809 paving the way for LOR to develop and introduce their supertrust product. Which they did, but not until just under 3 years later in Dec 1992 after much scrupulation by the SEC.
March 9th 1990
The First Ever Listed ETF Like Product
  • However LOR were technically beaten too it, the first ever ETF like product was listed in Canada on the 9th March 1990 the TIPS (Toronto 35 Index Participation Fund) and tracked the TSX 35 Index. This was followed by the HIPS (Hundred Index Participation Fund) tracking the TSX 100 Index.
  • In March 2000 the TIPS and HIPS ETF's were merged into what we know today as the iUnits S&P/TSE Index Participation Fund (Ticker: XIU:CN) which has over $12bn in AUM.
January 22nd 1993
AMEX makes the “Most” of Spiders.
  • LOR's supertrust's never really took off due to their institutional focus and high complexity.
  • The first commercially successful ETF debuted in the U.S. on 22nd January 1993 after Nathan Most, a product development specialist at AMEX wanted to create a product that could trade like a stock but also be backed by something similar to a mutual fund. This idea led to the inception of the SPDR or “Spider” which was listed on the American stock exchange AMEX. Today the SPDR S&P 500 ETF is still the largest in the world with over $1.8 Trillion in AUM.
April 11th 2000
The Race is On in Europe
  • With America close to a decade in front, Europe had seen enough and wanted in on the success of the innovation that was ETF's.
  • Europe's first listings of ETF's came on 11th April 2000 with the DJ STOXX 50 and DJ Euro STOXX 50 on the Deutsche Boerse. Followed very closely by the iShares FTSE 100 listed on the LSE.
  • Many European countries followed suit:
August 27th 2001
Australia Wants in
  • The first ETF's listed in Australia were the SPDR S&P/ASX 50 (SFY AU) and SPDR/ASX 200 Fund (STW AU) on the ASX on 27th August 2001.
  • Since then Australia including both Private and institutional investors have taken ETF's under their belt creating a $20bn market.
  • You don't need to be a millionaire to invest in ETF's the average aussie has a median account balance of around $35k ($50k for SMSF) (source, SSGA SPDR, tria investment partners)
2016 Onwards
A $3 Trillion Market
  • Global AUM of ETF's topped $3 trillion at the end of May 2015.
  • “Our forecast was that assets would break through US$3 trillion by the middle of 2015. It took the global ETF/ETP industry 19 years to reach US$1 trillion in assets under management, 23 years to reach US$2 trillion in AUM and just 25 years to reach US$3 trillion in AUM. The increasing rate of asset growth illustrates how ETFs have been embraced as an investment solution by institutional investors, financial advisors and retail investors around the world” according to Deborah Fuhr, managing partner of ETFGI.
  • Source: http://www.etftrends.com/2015/06/etfs-top-the-3-trillion-milestone/, ETFGI
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