Editing Index fund (section)

==Origins==
The first theoretical model for an index fund was suggested in 1960 by [[Edward J Renshaw|Edward Renshaw]] and [[Paul J Feldstein|Paul Feldstein]], both students at the [[University of Chicago]]. While their idea for an "Unmanaged Investment Company" garnered little support, it did start off a sequence of events in the 1960s.<ref name="TMOTRM">{{cite book|last=Fox|first=Justin|title=The Myth of the Rational Market|pages=111–112|chapter=Chapter 7: Jack Bogle takes on the performance cult (and wins)|publisher=HarperCollins|location=USA|date=2011|isbn=978-0-06-059903-4}}</ref>

Qualidex Fund, Inc., a Florida Corporation, chartered on May 23, 1967 (317247) by Richard A. Beach (BSBA Banking and Finance, University of Florida, 1957) and joined by Walton D. Dutcher Jr., filed a registration statement (2-38624) with the [[U.S. Securities and Exchange Commission|SEC]] on October 20, 1970 which became effective on July 31, 1972. "The fund organized as an open-end, diversified investment company whose investment objective is to approximate the performance of the Dow Jones Industrial Stock Average", thereby becoming the first index fund.{{citation needed|date=August 2023}}

In 1973, [[Burton Malkiel]] wrote ''[[A Random Walk Down Wall Street]]'', which presented academic findings for the lay public. It was becoming well known in the popular financial press that most mutual funds were not beating the market indices. Malkiel wrote:

{{blockquote|What we need is a no-load, minimum management-fee mutual fund that simply buys the hundreds of stocks making up the broad stock-market averages and does no trading from security to security in an attempt to catch the winners. Whenever below-average performance on the part of any mutual fund is noticed, fund spokesmen are quick to point out "You can't buy the averages." It's time the public could.

...there is no greater service [the New York Stock Exchange] could provide than to sponsor such a fund and run it on a nonprofit basis.... Such a fund is much needed, and if the New York Stock Exchange (which, incidentally has considered such a fund) is unwilling to do it, I hope some other institution will.<ref>{{cite book |author=Burton Malkiel |year=1973 |title=A Random Walk Down Wall Street |publisher=W. W. Norton |pages=226–7 |isbn=0-393-05500-0}}</ref>}}

[[John Bogle]] graduated from [[Princeton University]] in 1951, where his senior thesis was titled ''The Economic Role of the Investment Company''.<ref>{{Cite web |last1=Bogle |first1=John |date=1950–1951 |url=http://findingaids.princeton.edu/collections/MC206/c0087|title= Senior Thesis, ''The Economic Role of the Investment Company''|publisher=Princeton University Library}}</ref> Bogle wrote that his inspiration for starting an index fund came from three sources, all of which confirmed his 1951 research: [[Paul Samuelson]]'s 1974 paper, "Challenge to Judgment"; [[Charles D. Ellis|Charles Ellis]]' 1975 study, "The Loser's Game"; and Al Ehrbar's 1975 [[Fortune (magazine)|''Fortune'' magazine]] article on indexing. Bogle founded [[The Vanguard Group]] in 1974; as of 2009 it was the largest mutual fund company in the United States.{{citation needed|date=April 2018}}

Bogle started the First Index Investment Trust on December 31, 1975. At the time, it was heavily derided by competitors as being "un-American" and the fund itself was seen as "Bogle's folly".<ref>{{cite web |first=John |last=Bogle |date=2006 |title=The First Index Mutual Fund: A History of Vanguard Index Trust and the Vanguard Index Strategy |url=http://www.vanguard.com/bogle_site/lib/sp19970401.html |website=Bogle Financial Center |publisher=[[The Vanguard Group]] |access-date=2007-08-04 |archive-url=https://web.archive.org/web/20130507033534/http://www.vanguard.com/bogle_site/lib/sp19970401.html |archive-date=2013-05-07 |url-status=dead }}</ref> In the first five years of Bogle's company, it made 17 million dollars.<ref>{{Cite news|url=https://www.economist.com/|title=The Economist - World News, Politics, Economics, Business & Finance|newspaper=The Economist|access-date=2019-02-04}}</ref> [[Fidelity Investments]] Chairman [[Edward Johnson III|Edward Johnson]] was quoted as saying that he "[couldn't] believe that the great mass of investors are going to be satisfied with receiving just average returns".<ref>{{cite news |first=Richard |last=Ferri |title=All About Index Funds |url=https://books.google.com/books?id=wuTWFNXuNw8C&q=index+fund+unamerican&pg=PA38 |publisher=[[McGraw-Hill]] |date=2006-12-22|isbn=9780071423380 }}</ref> Bogle's fund was later renamed the Vanguard 500 Index Fund, which tracks the [[S&P 500|Standard and Poor's 500 Index]]. It started with comparatively meager assets of $11 million but crossed the $100 billion milestone in November 1999; this astonishing increase was funded by the market's increasing willingness to invest in such a product. Bogle predicted in January 1992 that it would very likely surpass the [[Magellan Fund]] before 2001, which it did in 2000.{{citation needed|date=April 2018}}

John McQuown and [[David G. Booth]] of [[Wells Fargo]], and [[Rex Sinquefield]] of the [[American National Bank]] in Chicago, established the first two Standard and Poor's Composite Index Funds in 1973. Both of these funds were established for institutional clients; individual investors were excluded. Wells Fargo started with $5 million from their own pension fund, while [[Illinois Bell]] put in $5 million of their pension funds at American National Bank. In 1971, [[Jeremy Grantham]] and Dean LeBaron at Batterymarch Financial Management "described the idea at a Harvard Business School seminar in 1971, but found no takers until 1973. Two years later, in December 1974, the firm finally attracted its first index client."<ref>{{cite book |first=John |last=Bogle |title=Common Sense on Mutual Funds|year=1999 |url=https://archive.org/details/commonsenseonmut00bogl |url-access=registration }}</ref>

In 1981, Booth and Sinquefield started [[Dimensional Fund Advisors]] (DFA), and McQuown joined its board of directors. DFA further developed indexed-based investment strategies. Vanguard started its first bond index fund in 1986.

[[Frederick L. A. Grauer]] at Wells Fargo harnessed McQuown and Booth's indexing theories, which led to Wells Fargo's pension funds managing over $69 billion in 1989<ref>{{cite journal|title=How This Man Manages $69 Billion|journal=Fortune|year=1989}}</ref> and over $565 billion in 1998. In 1996, Wells Fargo sold its indexing operation to [[Barclays|Barclays Bank of London]], which it operated under the name Barclays Global Investors (BGI). [[BlackRock|Blackrock, Inc.]] acquired BGI in 2009; the acquisition included BGI's index fund management (both its institutional funds and its iShares ETF business) and its active management.