William L. Fouse
Chairman emeritus, Mellon Capital Management Corp., San Francisco
Bill Fouse pioneered the index fund.
He was a leading proponent of applying ideas of modern portfolio theory, including the efficient market hypothesis and quantitative methods, to investing.
He created an index fund in 1971 for Samsonite Corp.'s pension fund. In doing so, Mr. Fouse helped introduce quantitative investing to the pension community, although it would be years before it became an accepted method of investing.
Mr. Fouse probably made the first effort to create an index fund in 1969 when he was at Mellon Bank in Pittsburgh. But Mellon rejected the idea. Mr. Fouse then joined Wells Fargo Bank. Samsonite's "quest was for someone who was applying modern portfolio theory to the management of pension assets," Mr. Fouse recalled in a 1998 article in Pensions & Investments.
But the Samsonite index fund was invested "on an equal-weighted basis in New York Stock Exchange stocks, racking up huge transaction fees from constant rebalancing," according to the article.
In 1972, he was instrumental in creating an index fund that matched the Standard & Poor's 500 index, putting Wells Fargo's own money in it. Illinois Bell Telephone Co.'s pension fund became its first outside client in 1973.
Said William F. Sharpe, STANCO 25 Professor Emeritus, Graduate School of Business, Stanford University: "In my opinion, the people at Wells Fargo at the time were among the most creative and innovative in the industry. From them I learned much about the real world of investment. … Undoubtedly, my greatest debt in this connection is to Bill Fouse, whose vision made Wells Fargo such an exciting and stimulating organization at the time."
In 1983, Mr. Fouse returned to Mellon to form Mellon Capital Management, an index and quantitative manager in San Francisco.
Wayne H. Wagner, chairman, Plexus Group, Los Angeles, said: "Many have called Bill the father of the index fund, but don't misinterpret this as an orgasmic event. Bill was the father, the wet nurse, the babysitter, the schoolteacher and, ultimately, the beaming parent at the graduation ceremonies."
