Investors pour money into ETF ahead of index reorganization

Investors pour money into ETF ahead of index reorganization
Impending change benefits State Street's communications exchange-traded fund.
SEP 19, 2018

Investors are starting to shift their cash to maintain exposure to some big tech names like Facebook Inc., Google parent Alphabet Inc. and Netflix Inc. before indexers reclassify the stocks. State Street Corp.'s Communication Services Select Sector SPDR Fund (XLC) took in $135 million last week, the most since the exchange-traded fund was launched in June. Last November, S&P Global Ratings and MSCI Inc., two of the world's biggest index providers, announced that they were reorganizing sectors by combining phone companies with some internet and media stocks — such as Facebook and Netflix — into a new group called "communication services." The moves are scheduled to take effect Monday. State Street designed XLC to reflect this restructuring of the Global Industry Classification Standard, or GICS. In light of the changes, the third-largest ETF issuer also is rebalancing its Technology Select Sector SPDR Fund (XLK) and Consumer Discretionary Select Sector SPDR Fund (XLY). The technology fund will dump its holdings of Facebook and Alphabet and the consumer discretionary fund will unload its positions in Netflix, Walt Disney Co. and Comcast Corp.https://www.investmentnews.com/wp-content/uploads/assets/graphics src="/wp-content/uploads2018/09/CI116996918.PNG"

"Institutional investors that use sector ETFs are getting in front of the GICS implementation," said Todd Rosenbluth, director of ETF and mutual fund research at CFRA Research. "XLC will be the only way to get Facebook, Google and Netflix exposure through a State Street ETF." (More: How do you spell investor relief in a bear market? E-T-Fs)

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