The SPDR S&P 500 ETF Trust, commonly just referred to as SPyDeR, or just simply the “SPY”, was the first US exchange-trade fund (ETF) to be created.
Back in 1993, the arcane structure used to create the SPY as a unit investment trust, required a specified termination date. Like many such trusts, the fund was initially structured to normally expire after 25 years, which would have been January 2018.
However, the SPY was also pegged to the lifespans of a collective of named individuals, thereby extending its own longevity. The SPY, as we know it, is projected to cease on Jan 22, 2118, or 20 years “after the death of the last survivor of the eleven person,” whichever occurs first.
The structure doesn’t provide those 11 people with any financial interest in SPY. But none of the eight spoken to by Bloomberg News was aware of their role in investing history.
“Today was the first I heard about this,” said Alexander Most, 27, who is about to start graduate school, studying education, policy and management. “Has it made me think about my mortality? Absolutely, in terms of projecting when this thing might end,” he added.
At least 8 of the 11 named in SPY’s documents have a family connection to the American Stock Exchange (AMEX), which structured the first ETF and which was later bought by the New York Stock Exchange (NYSE) Euronext in 2008.
Claire McGrath was a lawyer in the options division of the AMEX in the early 1990’s. She remembers a call went out for babies’ names that could be used by the trust. She volunteered her son, Kevin, and two nephews, Paul and Peter Pavelka.
” had my son, and they asked if I would mind if they used him,” McGrath said.
“It’s interesting because it’s an arcane rule that trusts always have to deal with, but it’s not a big deal. At the time, when we were creating these things, we had no idea they would become as spectacular.”
Kevin now works in public relations in New York, while Paul is based in Philadelphia tending bar at a trendy restaurant and Peter works for the same city’s water department.
Jay Baker, now director of capital markets at Exchange Traded Concepts, an ETF issuer, put forward his daughter’s name. “They needed some names, I think somebody said ‘Would you volunteer your daughter?’ and obviously she didn’t have a say in it, and I was fine with it. It was just part of the process,” he said.
Alexander Most is the grandson of Nathan Most, one of the creators of SPY.
Alabama-based siblings Rian and John Imwalle also ended up on the list; their late step-grandmother, Marilyn, worked for the corporate communications team.
As did Emily Weber whose father Cliff Weber worked at the AMEX and later NYSE for more than two decades. “I’m honoured to be part of it and how we’re tied together on this is, I think, pretty special,” said Emily, 26, who works in enterprise sales in New York.
“I’m proud of the way it’s gotten to this point. I’m happy for everyone who was working on it.”
One of the few people mentioned in SPY’s documents that was unrelated to the AMEX is Elizabeth Angel, Atlanta-based engineer and daughter of Jim Angel, a renowned finance professor at Georgetown University.
More than US$250 billion rests on the longevity of these 11 ordinary kids born between May 1990 and January 1993. They are now carving out careers in public relations, restaurants and sales, spread around the country from Boston and Philadelphia to Alabama and Utah.
Of course, with the oldest of the “SPY 11” not yet 30 years old, anyone who invests in or trades the SPY has a while to work out an alternative.
But it is a quirky reminder of how the ETF industry started out. The SPY is not the only ETF set up this way; seven other funds were also set up as unit investment trusts and at least three of them also included a provision relating to human lifespans.