Last week, the Vanguard S&P 500 Index Fund turned 40 (the fund was started as the First Index Investment Trust). The Wall Street Journal reports that the fund, which started with only $11.3 million in assets, has grown to $252 billion today. While index funds and ETFs have about $5 trillion in assets, the funds initially faced an uphill battle. The article notes that the Vanguard fund fell well short of its initial goal of opening with $150 million, and that critics called the funds “un-American and a sure path to mediocracy.” According to the article, index products continued to face an uphill climb during the “sluggish” markets of the 1970s; however, the products really benefitted from the “epic” bull market of 1982 – 2000.
The Vanguard fund was not the industry’s first attempt at indexing, however. The article explores two other index providers that pre-dated the Vanguard Fund. Wells Fargo started an indexed portfolio of major New York Stock Exchange companies in 1971 for the Samsonite pension fund. However, that fund held equal amounts of each company rather than an amount proportionate to the market value of the company in the index, making it cumbersome to run. In addition, by 1975, American National Bank in Chicago had about $300 million in several index funds that it ran for its institutional clients.