The Wilshire 5000 Was the First Total Market Stock Index. At 50, It has Gone Global.
Welcome to the golden anniversary of the first U.S. total stock market index, which boasts an eventful and little-known history that can teach us a lot about how financial markets have evolved over time.
The index, now known as the FT Wilshire 5000, also has a fascinating founder. And in the past few years, it has acquired an impressive list of international owners. The Wilshire 5000 was founded in 1974 by Dennis Tito, a numbers-loving guy who named his newly created market metric after the street on which his company, then known as Wilshire Associates, was located. Its address was 100 Wilshire Blvd. in Santa Monica, the upscale Los Angeles suburb. Hence the “Wilshire” in both the corporate and the index name.
Tito, a New York City native, had moved to California from Queens to work at the Jet Propulsion Laboratory in Pasadena after getting a master’s degree in 1964 from Rensselaer Polytechnic Institute. In 1972, he left the JPL and along with some colleagues opened Wilshire Associates, a firm that pioneered using computer-based technology to enhance investment performance. “In his spare time, [Tito] tried to use computers to figure out how to beat the market,” says Jason Schwarz, Wilshire’s current president.
That endeavor helped the firm gather lots of customers, including the giant California Public Employees’ Retirement System. Selling services to Calpers and other institutions helped make Tito very wealthy. His rapidly rocketing wealth allowed him to fork over a reported $20 million in 2001 to become the first “space tourist” by buying a ride aboard a Russian Soyuz spacecraft to the International Space Station.
In 2022, Tito, at age 82, announced that he and his third wife, Akiko Tito, had made reservations to fly to the moon on one of Elon Musk’s SpaceX rockets. It isn’t clear when—or if—that will take place or how much Tito, who declined to speak with me, will pay for the ride. But that announcement added to his public profile.
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The Wilshire 5000, though a lot less flashy than Tito’s space excursions, has had a far greater long-term impact. Tito launched the index in October 1974 and intended it to serve as a metric for advisory services offered by Wilshire Associates.
The Wilshire 5000’s name itself is a clever piece of marketing. There were only 4,700 stocks in the index when it was launched, according to Wilshire’s current owners. But a Wilshire 5000 index sure sounds better than a Wilshire 4700 index.
You can find year-by-year numbers of stocks in the Wilshire in the nearby chart. After peaking at 7,378 stocks in 1998, the index had 3,392 as of Jan. 31, the lowest number since it was started. But it’s still called the FT Wilshire 5000.
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The number of stocks in the index has been shrinking because mergers, takeovers, and leveraged buyouts have taken more companies from the public market than initial public offerings and spinoffs have added to it. Both the rise to over 7,000 companies in 1998 and the 50%-plus decline since then show how financial markets have been changing.
In 1992, Vanguard made a deal with Tito’s company to use the Wilshire 5000 as the benchmark of the first total U.S. market index fund. In another example of market change, that fund has become the biggest mutual fund in the U.S., with some $1.5 trillion of assets.
In April 2004, Dow Jones took over running the index, and the Wilshire 5000 became the Dow Jones Wilshire 5000. It retained that name until March 31, 2009, when Dow Jones and Wilshire parted ways, and the index returned to being the Wilshire 5000. Dow Jones, the parent of Barron’s, declined to discuss why the partnership with Wilshire was created or why it ended. Current Wilshire management said it doesn’t know.
In 2005, in yet another example of how the financial world has changed, Vanguard ditched the Wilshire 5000 and began using Morgan Stanley Capital International’s total market index. That’s because MSCI offered lots of other indexes that Vanguard could use as benchmarks for other index funds. (Since 2013, Vanguard has been using the CRSP U.S. Total Market Index, created by the Center for Research in Security Prices.)
Meanwhile, Wilshire gradually lost mindshare to market metrics such as the S&P 500, the Nasdaq, and various Russell indexes, and lost market share to other total market indexes.
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Then came a big change: In 2021, Tito sold Wilshire Associates to two private-equity funds for an undisclosed price. Like Tito, Wilshire Indexes’ current chief executive, Mark Makepeace, has a varied history. Makepeace, who’s British, founded FTSE International, now the FTSE Russell, in 1995 and was responsible for turning that start-up into one of the world’s largest developers of indexes.
Makepeace told me that he saw the Wilshire 5000 name as an underutilized asset. He quickly made a deal with the Financial Times to turn the Wilshire 5000 into the FT Wilshire 5000.
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Last March, Wilshire spun off its index business. In addition to the two private-equity funds that bought Wilshire Associates, Wilshire Indexes’ owners now include the Financial Times, the Singapore Exchange, the parent of Japan’s Nikkei 225 index, and Makepeace himself.
Under Makepeace’s leadership, Wilshire Indexes launched a global equity index series and a range of specialty indexes, all of which have FT Wilshire as their first names.
So the Wilshire 5000, once an insular U.S. market indicator, has now become an international brand, thanks to innovation and savvy promotion. I can’t wait to see how its new owners celebrate its 50th.
The writer is an independent business journalist and seven-time winner of the Loeb Award, business journalism’s highest honor.
Email: editors@barrons.com
