An Index for Every Investment
An in-depth look at Standard & Poor's legacy and complete family of indices
By Melinda Chu and Bo Chung
For many years, Standard & Poor's has been synonymous with the S&P 500. This leading measure of the U.S. stock market is the world's most highly visible and widely recognized index. Today, investors have voted with their money – over $1.1 trillion is directly invested in the S&P 500 index while trillions more are benchmarked to the index and represented in futures and options markets.
The S&P family of indices expanded in the 1990s when Standard & Poor's introduced additional U.S. based indices to complete the domestic market coverage. And by the late 1990s, Standard & Poor's had taken its indexing expertise global by forging relations with various Stock Exchanges around the world to develop local market indices based on the same index construction criteria that had proved so successful in the U.S. These indices combined to create the S&P Global 1200, the world's first real-time global market index.
Standard & Poor's strength lies in the development of indices that are representative of their markets while balancing this coverage with liquidity and efficiency to support the creation of index-linked products. The success of this model has been demonstrated numerous times with the large number of futures, options and ETFs around the world linked to S&P indices.
In 2003, Standard & Poor's added a new family of benchmark indices to its existing index offering. To complement its widely followed series of investable indices, Standard & Poor's introduced the S&P/Citigroup Global Equity Index Series to become a full service index provider.
With the combination of investable and comprehensive indices, Standard & Poor's now offers a complete suite of indices. Different indices cater to different investors. No one index serves the purpose of all investors. The ultimate choice depends on investor requirements. Now one index provider can serve the needs of all investors. From broad market indices to representative, efficient indices, the choice begins with S&P
History of the S&P Indices
The S&P 500
The introduction of the S&P 500 on March 4, 1957 , was a milestone in the quest to find a more perfect means of measuring the performance of the U.S. stock market. Prior to this, the 233 Composite Index was Standard & Poor's first broad market indicator. Introduced in 1923, this index was calculated for publication once a week.
Today, the S&P 500 is a real-time index. Designed to be a measure of leading companies in leading industries, the S&P 500 is widely recognized as the premier market measure of the U.S. stock market.
In the 1970s, the proliferation of index funds took off as efforts by active managers to out perform the S&P 500 proved futile. In 1982, the Chicago Mercantile Exchange (CME) began trading futures on the S&P 500. This made possible a whole range of new products structured around the S&P 500. The futures contracts proved successful, and in 1983, options began trading on the Chicago Board Options Exchange (CBOE).
The emergence of exchange traded funds (ETFs) in the 1990s provided another vehicle for managing indexed portfolios. The first ETF in the U.S. began trading in 1993 on the American Stock Exchange (AMEX). The SPDR (Standard & Poor's Depository Receipt) is a listed basket of equities managed to mirror the performance of the S&P 500. From 1993, it has today grown to become the most successful ETF product in the market, with a total net asset value in excess of $43 billion.
The availability of liquid futures and options markets, together with the strength of the ETFs, are all testaments to the success of the S&P 500 as an investable measure of the U.S. equities market. With over $1.1 trillion directly invested in this index, the S&P 500 is a true measure of the U.S. market economy.
The Complete S&P U.S. Index Series
In the early 1990s, Standard & Poor's recognized the need to extend the S&P 500 beyond 500 companies. While the S&P 500 is still recognized as the single best measure of the U.S. equities market, the addition of the S&P MidCap 400 index in 1991 and the S&P SmallCap 600 index in 1994 expanded the investable universe.