Broad U.S. Equity and Style ETFs
The exchange-traded fund (ETF) evolution has its roots in the broad U.S. equity market SuperTrust units introduced in December 1992. The exchange-traded units were benchmarked to the Standard & Poor’s (S&P) 500 Index. The AMEX launched SPDR Trust (symbol: SPY) one month later, and that ETF also tracked the S&P 500 Index. The AMEX followed with the Mid Cap SPDR Trust (symbol: MDY) in 2005. MDY is benchmarked to the S&P 400 Mid Cap index. Industry SPDRs made their debut in 1998 (see Chapter 12) followed by benchmark-style and size ETFs in 2000. All U.S. equity ETFs were benchmarked to S&P indexes.
Competing index providers to S&P negotiated ETF licensing deals in 2000. This brought other benchmark products to the market. The first competitor to S&P dominance was Frank Russell & Company. Other benchmark indexes for ETFs were provided by Dow Jones Wilshire, Morgan Stanley Capital International (MSCI), and Morningstar.
The first ETF benchmarked to a strategy index was introduced in 1999. The NASDAQ-100 Trust, now PowerShares QQQ (symbol: QQQQ) is benchmarked to the NASDAQ-100 index. It is a single-exchange index that lists only stocks that trade on the NASDAQ, less financial stocks. In 1999, QQQQ helped promote the NASDAQ as the new market for the millennium.
A series of ETFs based on strategy indexes were launched by newcomer PowerShares in 2003. The PowerShares Dynamic Market Portfolio (symbol: PWC) seeks to replicate, before fees and expenses, ...