In late September, the sector mappings around Technology, Consumer Discretionary, and Telecom will be revamped, impacting 8.7% of the S&P 500 index's market capitalization.
There has been a rapid evolution in the way people communicate, access entertainment content and other information. This is a direct result of the integration between telecommunication, media and internet companies. These companies can now provide bundled offerings over multiple mediums to provide content to their customers. Now that technology is really a part of every company and the lines between "tech" companies and "other" become increasingly blurred, the S&P and MSCI indexes are altering the classifications of companies within the industries.
The revised GICS® structure which will be implemented after the close of business (ET) on Friday, September 28, 2018 in GICS Direct. The changes will be implemented in the MSCI Equity Indexes in one step as part of the November 2018 Semi-Annual Index Review.
What is really happening? The Telecommunication Services Sector is being broadened and renamed as Communication Services to include companies that facilitate communication and offer related content and information through various media.
Key changes include:
How might sector profiles change:
Bottom-line: These changes will force the purchase and sale of securities in many popular sector ETFs and index funds and impact the risk management process for many U.S. and global products across styles and the investment spectrum. Money flow could be impacted due to forced rebalancing.