Seismic Sector Shift To Shake Up 30 ETFs

November 20, 2017

On Nov. 15, S&P Dow Jones Indices and MSCI announced a dramatic change to its Global Industry Classification Standard (GICS), which underpins the indexes backing hundreds of ETFs.

The changes, which go into effect next year, will reorganize several high-profile technology stocks and realign sector definitions such that the so-called FANG (Facebook, Amazon, Netflix, Google) stocks would likely move into a single sector.

The revisions, announced as part of their annual review of the GICS, will involve renaming the “telecommunication services sector” to the “communications services sector” and broadening its scope considerably.

The renamed sector will still include telecom companies, but now it will also include internet media companies, mobile gaming app makers, online streaming services, search engines, social media platforms and more.

The ETF Impact

As much as $62 billion in ETF assets could be impacted by the change.

No specific stock reclassifications have been announced yet, but the changes could affect the lineup of at least 30 sector funds, including those from Vanguard, iShares, State Street, Fidelity, Guggenheim and PowerShares. A list of ETFs that could be impacted is below:

 

ETFs Potentially Impacted By GICS Change

Ticker Fund AUM ($M) Segment
XLK Technology Select Sector SPDR Fund 19440.00 Equity: U.S. Technology
VGT Vanguard Information Technology ETF 16550.00 Equity: U.S. Technology
XLY Consumer Discretionary Select Sector SPDR Fund 11980.00 Equity: U.S. Consumer Cyclicals
VCR Vanguard Consumer Discretionary ETF 2180.00 Equity: U.S. Consumer Cyclicals
RYT Guggenheim S&P 500 Equal Weight Technology ETF 1530.00 Equity: U.S. Technology
IXN iShares Global Tech ETF 1410.00 Equity: Global Technology
IGM iShares North American Tech ETF 1340.00 Equity: North America Technology
FTEC Fidelity MSCI Information Technology Index ETF 1300.00 Equity: U.S. Technology
SKYY First Trust Cloud Computing ETF 1200.00 Equity: Global Technology
VOX Vanguard Telecommunication Services ETF 1190.00 Equity: U.S. Telecommunications
IGV iShares North American Tech-Software ETF 1140.00 Equity: North America Software
TECL Direxion Daily Technology Bull 3x Shares 492.23 Leveraged Equity: U.S. Technology
PSCT PowerShares S&P SmallCap Information Technology Portfolio 486.70 Equity: U.S. Technology
XRT SPDR S&P Retail ETF 414.00 Equity: U.S. Retail
IXP iShares Global Telecom ETF 370.80 Equity: Global Telecommunications
XSD SPDR S&P Semiconductor ETF 368.18 Equity: U.S. Semiconductors
FDIS Fidelity MSCI Consumer Discretionary Index ETF 298.61 Equity: U.S. Consumer Cyclicals
RXI iShares Global Consumer Discretionary ETF 198.05 Equity: Global Consumer Cyclicals
FCOM Fidelity MSCI Telecommunication Services Index ETF 111.87 Equity: U.S. Telecommunications
RCD Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF 69.13 Equity: U.S. Consumer Cyclicals
PSCD PowerShares S&P SmallCap Consumer Discretionary Portfolio 65.99 Equity: U.S. Consumer Cyclicals
XSW SPDR S&P Software & Services ETF 54.71 Equity: U.S. Software
IGN iShares North American Tech-Multimedia Networking ETF 46.31 Equity: North America Communications Equipment
XTL SPDR S&P Telecom ETF 46.08 Equity: U.S. Telecommunications
RETL Direxion Daily Retail Bull 3x Shares 39.79 Leveraged Equity: U.S. Retail
TECS Direxion Daily Technology Bear 3X Shares 17.47 Inverse Equity: U.S. Technology
TCHF iShares Edge MSCI Multifactor Technology ETF 6.11 Equity: U.S. Technology
XTH SPDR S&P Technology Hardware ETF 3.95 Equity: U.S. Technology Equipment
XWEB SPDR S&P Internet ETF 3.57 Equity: U.S. Internet
CNDF iShares Edge MSCI Multifactor Consumer Discretionary ETF 2.90 Equity: U.S. Consumer Cyclicals
    $62,350

 

New Constituents For VOX, FCOM, XTL

The GICS methodology is reviewed annually to ensure the sector framework continues to reflect the reality of the equity markets. The last time the GICS was reviewed, S&P and MSCI broke out a new real estate sector from the existing financials sector. With it came at least one new ETF, the Real Estate Select Sector SPDR Fund (XLRE) (see: "Growing Pains For New Real Estate Sector").

This year's revision, however, has the potential to be much more impactful.

For starters, the new sector will split into two industry groups: telecommunication services, and media and entertainment.

The telecommunications services group will continue to provide exposure to providers of telecom and related services, but now it will also include internet service providers. That means telecom ETFs like the $1.2 billion Vanguard Telecommunications Services ETF (VOX), the $370 million iShares Global Telecom ETF (IXP), the $112 million Fidelity MSCI Telecommunication Services Index ETF (FCOM) and the $46 million SPDR S&P Telecom ETF (XTL) will likely welcome new constituents to their portfolios, such as AT&T, CBS, Comcast or Verizon Communications.

 

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