Executive Summary
2023 marks a quarter century since S&P Dow Jones Indices (S&P DJI) and the TMX Group partnered to bring investors what is today an innovative and comprehensive suite of Canadian stock market indices. As Canada’s most widely followed stock market indicators, the S&P/TSX Index Series serves as the de facto measure of value and performance for multiple segments of the nation’s stock market.
The past 25 years have seen significant market growth of the flagship S&P/TSX Indices, the S&P/TSX Composite Index and the S&P/TSX 60, and a transformation of how they are used. Today, the indices serve an integral role in Canada’s investment infrastructure. The asset management industry utilizes the S&P/TSX Composite Index and other related indices as the investable universe for active investment strategies and to benchmark fund performance. Likewise, pension funds and other asset owners use the S&P/TSX Indices to benchmark their domestic portfolios. With an estimated CAD 814 billion of Canadian equity funds benchmarked to S&P/TSX Indices, the series represents the most widely used benchmarks for Canadian equity funds by far.
Perhaps most importantly, the S&P/TSX Index Series served as the foundation for the growth of index-based investing in Canada. The deep ecosystem of liquid financial products tracking key S&P/TSX Indices allows active and passive investors to express investment views in an efficient manner. S&P DJI’s SPIVA® research has also shined a light on the inability of most Canadian fund managers to beat their benchmarks, further highlighting the benefits of passive investing. As has occurred in other parts of the world, the growth of index investing has democratized investment solutions that were previously only available to large institutions and lowered the cost of investing for millions of Canadians.
The Evolution of the S&P/TSX Index Series
Beginning with the introduction of the S&P/TSX 60 on Dec. 31, 1998, the partnership between S&P DJI and TMX Group has resulted in the development of a broad suite of investable indices measuring Canadian equities, covering a range of market segments and themes. Less than a year after the launch of the S&P/TSX 60, Barclays Global Investors listed what is today known as the iShares S&P/TSX 60 Index ETF, which is now the largest ETF in Canada in terms of assets invested.
The S&P/TSX Index Series subsequently evolved with the S&P/TSX SmallCap Index and the S&P/TSX Completion Index offering small- and mid-cap market benchmarks starting in 1999. The years 2000 to 2002 saw the introduction of a suite of sector-focused indices, alongside S&P DJI introducing the Global Industry Classification Standard® (GICS®). This development allowed investors to dissect market performance along sector lines and led to the creation of products linked to several Canadian sector indices beginning with the S&P/TSX Capped Energy and S&P/TSX Capped Financials.
To complement the traditional market-capitalization-weighted indices, the noughties also saw the development of equal-weighted indices and dividend-oriented indices. The S&P/TSX Canadian Dividend Aristocrats® Index was the first to offer exposure to high-yielding Canadian companies, followed by the S&P/TSX Composite High Dividend Index.
The first Shariah-compliant index in Canada was established in 2008 with the launch of the S&P/TSX 60 Shariah. The S&P/TSX 60 VIX® Index—known as the “fear barometer” of the Canadian market—launched in 2010 and measures implied equity market volatility.
