Managers Braced for MSCI Index Rebalancing

December 8, 2000 ( - Morgan Stanley Capital International (MSCI) may stir up some dust over the weekend - as much with as much as $200 billion in portfolio rebalancing transactions generated as it changes weightings in its indexes.

Plan sponsors with funds tied to those benchmarks could see an impact on their holdings as well.

On Sunday, MSCI is expected to announced a change in the way companies are weighted in its indexes, basing it on the shares available for trading – or, the “free float” – rather than on a company’s total valuation, which can include shares that aren’t traded. MSCI indexes are used as benchmarks for some $4 trillion in investments worldwide, according to MSCI.

Companies with large stock positions held by governments, families or other companies will likely be the biggest losers in such a change, according to Bloomberg. Japan, where many companies own large portions of each other in cross shareholdings that aren’t available to the public, is expected to suffer a net outflow, while Great Britain and the US are expected to benefit.

The announcement will come at 12:15 p.m. Central European Time Sunday.