In 2013 there are more than 1,500 ETF’s worldwide which have accumulated many billions of dollars. All types of investors, from small individuals with simple strategies to mega sophisticated hedge funds managing billions use ETF’s today. But the ETF industry is a relatively recent phenomenon; many ETFs have only been around for a handful of years, with the first debuting in 1993. An abbreviated history follows:
January 1993 the S&P 500 SPDR (SPY) debuts, this fund is still the big daddy of the ETF world with $127bn invested.
1996: iShares debuted a buffet of international ETFs targeting Australia (EWA), Canada (EWC), Sweden (EWD), Hong Kong (EWH), Germany (EWG), Italy (EWI), Japan (EWJ), Belgium (EWK), Switzerland (EWL), Malaysia (EWM), the Netherlands (EWN), Austria (EWO), Spain (EWP), France (EWQ), Singapore (EWS), the United Kingdom (EWU), and Mexico (EWW).
1998: Sector based SPDRs were launched – These initial Sector SPDRs are pretty basic; they split up the S&P 500 by sector. Fast forward to today and there are ETFs that deliver access to extremely narrow sub-sectors of the U.S. economy, such as smartphones, silver miners, and social media (SOCL). In 1998 the first step to this level of granularity was taken.
2002: Bond ETFs were launched – iShares launched its first four bond ETFs — IEF, LQD,SHY, and TLT in 2002. Bond ETFs have become so popular it is be hard to believe that these products were born a decade ago.
LQD remains the big daddy of the bond ETF world with about $24 billion in assets. TIP, which launched in 2003, is only slightly smaller with about $23 billion.
2004: State Street launched MidCap SPDR (MDY), which replicates the performance of the S&P MidCap 400 Index.
In November 2004: Gold SPDR (GLD) Launches which was the first commodity ETF to debut and is now one of the largest ETF’s by assets. It offered exposure to gold bullion.
2006: Exchange traded notes were launched by Barclays. These ETN’s offer exposure to a diversified basket of commodity futures contracts via the the Dow Jones-UBS Commodity Index ETN (DJP) and S&P GSCI Total Return Index ETN (GSP).
Now there were more than 200 ETNs with aggregate assets of more than $16 billion.
November 2009: Charles Schwab launhed commission free ETFs in the US, a game changing move at the time. Charles Schwab was a latecomer, but changed the way the game was played with the debut of four funds that could be traded commission free within Schwab accounts. In the months that followed, other US brokerages quickly followed suit: Fidelity, TD Ameritrade, Vanguard and E*Trade now also offer commission free ETF trading.
December 2010: funds invested in ETF’s broke the $1 trillion barrier. In late 2010 the ETF industry hit an inevitable milestone of $1 trillion.
2013: Assets have continued to climb breaking through the $1.8 trillion mark and showing no signs of slowing down.