New security to track Nasdaq 100 Unit investment trust to be known as Nasdaq Gold

Securities industry

September 03, 1998|By BLOOMBERG NEWS

WASHINGTON -- The Nasdaq Stock Market Inc. is creating a new security that will let people invest in an index of the top 100 Nasdaq nonfinancial stocks.

The second-largest U.S. stock market filed with the Securities and Exchange Commission to sell shares in a unit investment trust called Nasdaq Gold.

The shares will track the performance of the Nasdaq 100, an index that has generated higher returns over the past five years than the better-known Standard & Poor's 500.

By purchasing Nasdaq Gold, investors will simultaneously receive stakes in the largest and most actively traded Nasdaq companies, including Microsoft Corp., Intel Corp. and Tele-Communications Inc.

The shares would essentially represent a bet on a portfolio of technologies ranging from computers and telecommunications to the Internet.

"We are responding to investor demand," in establishing Nasdaq Gold, said John Jacobs, Nasdaq's vice president of investor services. "Nasdaq 100 has been a very strong benchmark for investors."

Jacobs said each Nasdaq Gold share will have a price that equals about one-tenth of the Nasdaq 100's trading level. With the Nasdaq 100 currently at 1,221.44, each share would be valued at about $122.

By letting investors put money on the direction of a stock index, the Nasdaq security will join a similar investment sold on the American Stock Exchange, which created Standard & Poor's depositary receipts known as SPDRs, or "Spiders," that track the S&P 500.

The Spiders have proven to be a popular way for investors to bet on the general direction of the market, particularly during market turbulence of recent days. More than 20 million Spiders changed hands during each of the last four trading days, during which the S&P 500 slipped more than 8 percent.

"The Spider is the easiest way to get exposure to the S&P 500 during intraday rallies and falls," said Dan Noonan, an Amex spokesman.

"They have consistently been among our heaviest-traded stocks during these days of volatility."

Still, buying into an index of stocks is "less volatile" than investing in individual technology companies, "and it allows a XTC more average investor to participate in the growth and earnings of those large-cap Nasdaq stocks," said Bill Glynn, a partner at Southeast Interactive Technology Funds, a venture capital firm with several start-ups on the Nasdaq.

Investing in the Nasdaq 100 would have been an extremely profitable venture in recent years. The Nasdaq 100 index has more than tripled during the past five years. The S&P 500 has more than doubled in the same period.

Until now, investors who wanted to track the Nasdaq 100 had to go to a professional money manager or establish their own portfolio of Nasdaq stocks. Nasdaq Gold represents the organization's first attempt to set up an index-based investment.

Pub Date: 9/03/98

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