The EURO STOXX 50® Index turns 20 this week, a period marked by financial crises and recoveries, a deeper economic union of the region, and the transformation of markets.
When the benchmark for Eurozone blue chips was established on Feb. 26, 1998, it was a seminal moment that launched STOXX Ltd. into existence and preceded the historical introduction of the euro by just over ten months.
The euro’s birth was an event that generated as much pride in some European quarters as it raised questions. Twenty years later, the monetary union is an integrated bloc that has mostly defied skeptics and withstood its fair share of financial woes.
Accurate gauge of the market
Right since its inception, the EURO STOXX 50 experienced some notable market moments marked by critical highs and lows. The tech boom at the end of the 1990s recorded an all-time high for the EURO STOXX 50, but also ended up causing its first bear market. The 2008 credit crisis saw banks implode, financial shares tumble, and policymakers step in to limit the ensuing recession. After 2010, the euro debt crisis further rattled economic data and shook investors, but was met with a concerted political effort to strengthen the ever-deeper union.
Throughout the ups and downs, the EURO STOXX 50 closely tracked the fate of the region’s largest companies, and became the undisputed market benchmark. Today, around $40 billion worth of assets are invested in exchange-traded funds (ETFs) linked to the index, while over 25 million futures based on the index are traded every month, making it the underlying for one of the world’s most popular exchange-listed and centrally-cleared derivatives. The EURO STOXX 50 futures were launched at Eurex in June 1998, also preceding the introduction of the common currency and of the monetary policy union.
Twenty years after its birth, the index has grown into at least 13 families of derived versions that include fixed-income, risk-control and sustainability strategies. The benchmark’s goal, though, hasn’t changed: to provide a balanced representation of the Eurozone’s supersector leaders and secure liquidity and transparency.
EURO STOXX 50 in numbers
- $40 billion in licensed ETFs
- 13 frames of dervied index versions
- 25 million index futures traded per month
From European heritage to global footprint
The two-decade history of STOXX, meanwhile, has been defined by constant expansion. From its European heritage, STOXX now publishes more than 12,000 indices globally across all asset classes.
Those indices are licensed to more than 600 companies globally. Approximately 25% of assets under management in Europe are based on STOXX indices, and the firm has a market share of well over 80% in the European structured products space.
But it’s the essence of our products that has undergone a striking transformation, changing our role, and us as a company, along the way.
Thanks to the explosion of new and alternative data in ways few imagined twenty years ago, and the consequent growth in quantitative investing, STOXX has evolved from an index provider to an Intelligent Investments Factory.
Our drive is to design simple yet powerful products, using the best available data, for investors to tackle the threats and opportunities of today’s interconnected global economy. For more on the Intelligent Investments Factory, please visit our recent article.
From multi-factor to multi-asset solutions, to an ever-growing Sustainability & ESG family, Thematic Indices and Select Diversification Solutions, each index addresses a specific need. This year we introduced the STOXX® AI Global Artificial Intelligence Index, the first thematic index to select its constituents by means of computer-science technology.
Boom in passive investing
At the same time, index-based investment vehicles have also boomed due to their simplicity and cost advantages. The expanding functionalities of indices is likely to continue lifting those vehicles to new grounds in terms of trading volumes and assets under management.
With artificial intelligence taking over more tasks in financial services, we foresee the role, construction and uses of indices will keep changing. ‘Smart’ index solutions will be the driver of growth for STOXX, with the definition of what constitutes ‘smart’ rewritten on a daily basis.
The products have changed, but the guiding ethos that governed us in 1998 remains intact: to provide transparent and rules-based indices to help investors target and express their views in the most efficient possible way.
If the pace of technology change is any guide, the next 20 years promise to bring even more and faster innovation to the world of STOXX indices. We look forward to a promising third decade and beyond.