[Editor's Note: In celebration of ETF Report’s 15th anniversary, we have created what we feel are the 15 most important U.S.-listed ETFs, one for each year of ETF Report’s existence. These featured funds are the ETF industry’s biggest game changers, and at least some of them are likely among the core holdings in your portfolio.]
SPY: SPDR S&P 500
And then there was "SPY"…
The brainchild of the late Nate Most, the SPDR S&P 500 (SPY | A-99) was the first U.S-listed ETF launched in January 1993.
SPY is no small achievement. It gave rise to what is today a $2.1 trillion U.S. ETF industry, comprising more than 1,700 funds. Globally speaking, it helped pave the way for thousands of ETFs, with nearly $3 trillion in global assets today.
SPY is also the largest ETF in the market, boasting roughly $170 billion in assets under management. And it's the most liquid security in the world, trading some $27.4 billion on average every day.
"SPY sparked a revolution in the asset management industry that significantly improved access to the markets and lowered costs for all investors," said Jim Ross, global head of ETFs at State Street Global Advisors, who was part of the original team that brought SPY to market.
While there were other strategies before SPY that sought to offer investors the ability to trade an index—such as the Toronto 35 Index Participation Units (TIPS), which tracked the Toronto 35 Index—SPY was the first bona fide ETF. TIPS lacked the creation/redemption structure ETFs are known for, and it had no mechanism to ensure it tracked its underlying index closely throughout the day, Ross says. SPY also was the first ETF product registered under the Investment Company Act of 1940.
But SPY has its quirks, too.
The fund is actually a unit investment trust that has an expiration date: Jan. 22, 2118, or 20 years after the death of the last survivor of 11 people named in the Trust Agreement, the oldest of whom was born in 1990 and the youngest of whom was born in 1993, according to Kathleen Moriarty, the attorney who helped bring SPY to market—and countless other ETFs since.
That date can be extended. In fact, it already was once. When the fund first came to market, it was set to expire 25 years later, or January 2018—less than three years from now.
The history of its name is also amusing. SPY was originally named "SPIRS," which was the acronym for Standard & Poor's Index Receipts.
"Eventually, it was decided that 'SPIRS' sounded like 'SPEARS' and no one wanted the product to be dubbed with the name of a weapon," said Moriarty, who's a partner at Kaye Scholer's Investment Management Group, said. SPY has also gotten cheaper over the years. It launched with an annual expense ratio of 0.20%. Today the fund costs 0.09%.