SPY Kids

To most people, “Spy Kids” conjures up memories of a kids’ movie franchise created by Robert Rodriguez back in the early 2000s.

To us, SPY kids is a reminder of a quirk in the legal structure used to set up the SPDR S&P 500 Exchange Traded Fund (ETF) Trust, commonly known as SPY. Today, these kids are probably collectively worth about $500 billion. We hope they remain healthy, as the fate of the world’s largest ETF rests on this group of thirty-something year-olds.

What I am talking about is a group of 11 ordinary kids born between May 1990 and January 1993. Back in 1993, when this fund was set up, the arcane structure used as a unit investment trust solved a practical problem by creating fund units that resembled a company’s shares. Most of the 11 names in SPY documents have a family connection to the American Stock Exchange, when a call went out to procure babies’ names that could be used to attach to the trust.

Claire McGrath, a lawyer in the options division of the AMEX at that time, volunteered her son Kevin and two nephews, Peter and Paul Pavelka. Others put their kids’ names in the mix as well, such as Jay Baker, then director of capital markets at ETF issuer Exchange Traded Concepts. He volunteered his daughter’s name.

It was not a big deal at the time as the legal requirements needed a specified termination date, which was initially structured to expire in 25 years, in January 2018. The expiration was later amended to peg the fund to the lives of the individuals, which extended the life of the fund. As of now, SPY, the fund, will cease to exist on January 22, 2118, or 20 years after the death of the last survivor of the 11 persons — whichever comes first. With 194 years to go, we should be fine to continue trading this amazing ETF.

What are these kids doing now? I have no idea. About five years ago, Alexander Most, the grandson of one of the creators of SPY, Nathan Most, was about to start graduate school. When asked if he ever thinks about his mortality, Most replied, “Absolutely, in terms of projecting when this thing might end.”

Other kids carved out careers in public relations, restaurants and sales, and spread out across the country from Boston and Philadelphia to Alabama and Utah. Claire McGrath’s son, Kevin, works in PR in New York, while Paul tends the bar at a trendy Philadelphia restaurant. When Bloomberg News sought them out several years ago for an interview, none of the kids were aware of their role in investing history.

Siblings Rian and John Imwalle from Birmingham, Alabama ended up on the list from their late step-grandmother, Marilyn, who worked for the corporate communications team. Elizabeth Angel, an Atlanta based engineer, is the daughter of Jim Angel, a renowned finance professor at Georgetown University. She’s also on the list and is one of a few non-AMEX related people on it.

Emily Weber was inducted into this exclusive club by her father, Cliff Weber, who worked at the American Exchange and later the NYSE. When asked in 2019, this 26-year old said, “I’m honored to be part of it and how we’re tied together on this is, I think, pretty special. I’m proud of the way it’s gotten to this point. I’m happy for everyone who was working on it.”

As for the movie Spy Kids, I believe the ratings were mixed. I have no intentions on watching it, unless of course, my grandkids insist.

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