Editing Passive management (section)

== History ==
The first US market indexes date to the 1800s. The [[Dow Jones Transportation Average]] was established in 1884 with eleven stocks, mostly railroads. The [[Dow Jones Industrial Average]] was created in 1896 with 12 stocks in industrial manufacturing, energy and related industries.<ref name=MoneyWeek>{{cite web|first=Ben|last=Judge|title=26 May 1896: Charles Dow launches the Dow Jones Industrial Average|url=https://moneyweek.com/392888/26-may-1896-charles-dow-launches-the-dow-jones-industrial-average/|work=[[MoneyWeek]]|date=May 26, 2015}}</ref> Both are still in use with modifications, but the Industrial Average, commonly called "The Dow" or "Dow Jones", is more prominent and came to be regarded as an important measure for the American economy as a whole. Other influential US indexes include the [[S&P 500]] (1957), a curated list of 500 stocks selected by committee, and the [[Russell 1000 Index]] (1984), which tracks the largest 1,000 stocks by market capitalization. The [[FTSE 100]] (1984) represents the largest publicly traded in the UK, while the [[MSCI World]] index (1969) tracks stock markets of the entire developed world.

[[Unit investment trust]]s (UITs) are a type of U.S. investment vehicle that prohibits or severely restricts changes to the assets held in the trust. One such UIT is the [[Voya Financial|Voya]] Corporate Leaders Trust (LEXCX), which as of 2019 was the oldest passively managed investment fund still in existence in the United States according to John Rekenthaler of [[Morningstar, Inc.]]<ref name="Rekenthaler2019">John Rekenthaler (2019-12-24). [https://www.morningstar.com/articles/960641/the-strange-and-happy-tale-of-voya-corporate-leaders-trust The Strange and Happy Tale of Voya Corporate Leaders Trust: A fund that shouldn’t succeed, but does]. Morningstar.com, accessed 02 November 2020</ref> Founded in 1935 as the Lexington Corporate Leaders Trust, LEXCX initially held 30 stocks, closely modeled on the Dow Industrials. LEXCX prohibited the purchase of new assets apart from those related directly to the original 30 (as with spin-offs or [[Mergers and acquisitions]]) and prohibited the sale of assets except when a stock eliminated dividends or was at risk of de-listing from the stock exchange. Unlike later index funds that are usually cap weighted, with greater proportional holdings in larger companies, LEXCX is share weighted: "holding the same number of shares in each company regardless of price."<ref>James P. O'Shaughnessy (1997). What Works on Wall Street: A Guide to the Best-Performing Investment Strategies of All Time, NY: McGraw-Hill, 0-07-047985-2, p. 9</ref> An evaluation by ''[[U.S. News & World Report]]'' found the fund was passively managed: "for all intents and purposes, this fund's portfolio is on autopilot."<ref>[https://money.usnews.com/funds/mutual-funds/large-value/voya-corporate-leaders-trust-fund/lexcx Voya Corporate Leaders Trust Fund: Overview. U.S. News & World Report. Accessed 2020-11-02]</ref>

The theory underlying passive management, the [[efficient-market hypothesis]], was developed at the Chicago Graduate School of Business in the 1960s.<ref name="Fox2009">Justin Fox (2009) The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street. HarperCollins</ref>

During this same period, researchers first began to discuss the concept of an "unmanaged investment company."<ref>{{Cite journal|last1=Renshaw|first1=Edward F.|last2=Feldstein|first2=Paul J.|date=1995|title=The Case for an Unmanaged Investment Company|url=https://www.jstor.org/stable/4479808|journal=Financial Analysts Journal|volume=51|issue=1|pages=58–62|doi=10.2469/faj.v51.n1.1859 |jstor=4479808 |issn=0015-198X}}</ref> In 1969, Arthur Lipper III became the first to try to turn theory into practice by petitioning the [[Securities and Exchange Commission]] to create a fund tracking the 30 stocks Dow Industrial Average. According to Lipper, the SEC did not respond.<ref name="Fox2009" /> The first index funds were launched in the early 1970s, by American National Bank in Chicago, Batterymarch, and Wells Fargo; they were available only to large pension plans.<ref name="Fox2009" />  The first index fund for individual investors was launched in 1976. The Vanguard First Index Investment Fund (now the Vanguard 500 Index Fund) was the brainchild of John (Jack) Bogle.<ref>{{Cite book|last=Fink|first=Matthew P.|title=The Rise of Mutual Funds|publisher=Oxford|year=2008|isbn=|pages=99}}</ref>