Investing December 8, 2000

Managers Braced for MSCI Index Rebalancing

December 8, 2000 (PLANSPONSOR.com) - 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.
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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.

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