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Potential Changes to GICS

edited October 2021 in Fund Discussions
"While the current consultation covers seven areas, the proposed reclassifications of renewable energy companies and firms involved in data processing and outsourced services have the potential to affect ETF investors."

"S&P DJI and MSCI have proposed consolidating all types of energy producers and related equipment and service providers under the energy sector. The current GICS structure classifies conventional energy producers involved with oil, gas, consumable fuels, and related equipment under the energy sector, whereas companies that generate electricity using renewable as well as non-renewable sources are classified under the utilities sector."

"S&P DJI and MSCI have also proposed moving the data processing and outsourced services sub-industry from the information technology sector to the industrials sector. Some data processing and outsourced services companies, however, would be reclassified to the financials sector under a new transaction and payment processing services sub-industry."



  • Is the underlying (unstated) idea to keep only hyper growth (futuristic?) tech in Technology sector and carve out everything else to other sectors so as to maintain a relevant size for the other sectors?
  • "Some of the tech sector’s largest constituents could be reclassified: Visa (ticker: V), Mastercard (MA), and PayPal (PYPL) would move to the financial sector; Automatic Data Processing (ADP) and Fidelity National Information Services (FIS) would join the industrials. The GICS developers say that the data-processing services provided by these firms are less about technology and more about 'business support activities' to the financial and industrial sectors."

  • Another change is coming in MSCI GICS and DJ/S&P industry classifications. This proposed new change will move several companies FROM IT/tech XLK TO financials (fintechs V, MA, PYPL) and industrials XLI (ADP, FIS). Note that several old IT/tech companies are already under communications XLC (FB, GOOG/GOOGL, NFLX) and consumer-discretionary XLY (AMZN). Several funds beyond those mentioned already would be affected (VGT, FTEC, etc); funds that do not use GICS classifications would obviously not be impacted (e.g. tech IYW). Active funds would be affected indirectly as their benchmarks may change. (Some renewable energy companies will be shifted FROM utilities XLU, industrials XLI and IT/tech XLK TO energy XLE; traditional power generators, distributors, suppliers will remain in utilities XLU).
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