A Brief History of the ETF

When I first studied the mutual fund industry six decades ago, I was struck by the promise of “daily liquidity.” Investors could liquidate their share of the funds they owned each day, essentially at an asset value determined at the subsequent close of business. I thought such a promise was remarkable, and it was honored almost without exception during the ensuing 60 years. Daily liquidity, along with professional management, diversification, convenience, and shareholder service were the keys to the fund industry’s enormous growth, which took place largely during the great bull market of 1982-1999. Fund industry assets soared from $2.5 billion in mutual fund assets when I joined the industry in 1951, to more than $6 trillion in 2000. While asset growth then slowed, it continued at a more reasonable 6 percent rate; with assets approaching $13 trillion as 2013 begins.