Nate Most, who conceived of the first exchange-traded funds (ETFs), died December 3rd at home in the San Francisco Bay area. Most was incredibly busy up to the last year, with frequent trips to cities from New York to Hong Kong and Shanghai. Always on the cutting edge and playing an integral part in the continuing development of ETFs, Most's idea of "retirement" at age 90 would have put most business travel schedules to shame.
Most leaves behind his family and a host of dear friends in the index industry, the present author included. There is what feels like a large empty space where Nate used to be. He was active and lively, and bubbling with passion and great ideas up to his last days. Even up to a couple weeks ago, he had written me extended comments including his thoughts about the new Gold ETF and his excitement about the direction the industry was heading.
Most was a longtime employee of the American Stock Exchange, where his background and a unique combination of circumstances helped to generate the very first ETF, the beginnings of an industry that has become the most rapidly growing sector of the financial services industry, and now includes over $260 billion in assets globally. And amazingly, all of this happened on Most's watch in the last 15 years of his life after he turned 75.
Nate's story - which is inextricably linked to the history of ETFs - is a remarkable one. The origin bears a direct relation to Nates background and vision and to the financial distress faced by the American Stock Exchange in the 1980s. Faced with a chronic lack of resources at the AMEX, Most took things in his own hands and came up with a product that he thought could make the AMEX some money. How he came up with the mechanism had as much to do with his background as a commodities trader and his observations about the mutual funds market as it had with anything that he'd previously done at the AMEX.
A physicist by training, Most worked on submarine acoustics for the United States Navy during World War II (cruising in dangerous proximity to Japanese submarines). He spent years traveling throughout India and the far east to sell acoustical material to theaters, Most importantly for exchange-traders, however, Most got into the cooking oil business in the 1960s. At that time, Most starte working for the Pacific Commodities Exchange.
There, he became accustomed to warehouse receipts, "You store a commodity and you get a warehouse receipt and you can finance on that warehouse receipt. You can sell it, do a lot of things with it. Because you don't want to be moving the merchandise back and forth all the time, so you keep it in place and you simply transfer the warehouse receipt."
It is here that the mental spark that ultimately led to the first ETF was spawned.