When the first ETFs came to market, they were built for a very specific reason—to give institutional investors easy access to liquidity. SPY, for instance, allowed investors to trade the S&P 500 stocks with one trade, rather than 500.
This focus on institutional liquidity persisted in the launches that followed SPY. The first real batch of funds to launch were called the WEBS, or World Equity Benchmark series. These funds, launched by Morgan Stanley, and later acquired by Barclays Global Investors, targeted a wide range of countries from Argentina to the United Kingdom. They allowed institutional investors to equitize cash and gain quick-touch exposure to critical markets.
Toward the end of this period, starting in the late 1990s, we saw another group of investors pile in: active traders. There was a time when the Nasdaq 100 ETF (QQQ | A - 64) was the most actively traded security on the market, during the heart of the dot-com boom. But those two groups defined the growth we saw in the first decade of ETFs: trading, both by institutions and retail.
As we entered the 2000s, and as BGI (now BlackRock) started to invest in growing the market, we went into the true early-adopter phase. Here we started to see the first big moves by the advisor community.
ETF.com’s progenitor website, IndexUniverse.com, came into being. The Inside ETFs conference started. We saw the first books published targeted at teaching advisors how ETFs worked. We saw the first advisory firms start actually marketing themselves as ETF-only or ETF-centric.