MSCI and S&P will be changing the classification for REITS, effective on Wednesday August 31.
· REITS will no longer be part of the Financials sector and will instead have their own sector. This will bring the number of S&P sectors to 11.
· This change will impact several financial ETFs that track S&P and MSCI indexes, most notably XLF.
· The amount of selling may be as much as $4bn, with $1bn on Aug 31 and around $3bn on Sept 16 (the GICS structure change will be official on Aug 31, but S&P has decided to implement the changes on Sept 16, to coincide with their quarterly rebalance).
· However, the actual amount may be much less since the largest affected ETF, XLF, announced that it will be implementing the change through a special dividend of XLRE – leaving the decision to retain REIT exposure up to shareholders. This could significantly mitigate selling activity.
Friday Sept 2: Securities to be included in the SEC Tick Pilot program will be established