GICS Changes to Affect Select Sector SPDRs, Other ETFs

The changes to the classification standard will have the biggest effects on five sectors.

HeatherBell_green_bg
|
Reviewed by: Heather Bell
,
Edited by: Heather Bell

As it does every few years, the Global Industry Classification Standard used by index providers such as S&P Dow Jones Indices and MSCI will be seeing some changes effective March 17.  

The most significant tweaks will materially affect five of the 11 GICS sectors—industrials, consumer discretionary, consumer staples, financials and information technology. They are the most significant changes to go into effect for GICS since the establishment of the communication services sector in 2018.  

Other changes will involve shifts in industry and subindustry groups within sectors that will not involve affected companies being moved to other sectors. 

According to State Street Global Advisors, the GICS changes will primarily affect 14 stocks that are switching sectors in the S&P 500 index, among other securities and indexes.  

The largest change is the renovation of the data processing & outsourced service subindustry as it currently exists in the information technology sector—of which it has represented roughly 14%—with its contents redistributed to subindustries in the financials and industrials sectors. The data processing & outsourced services subindustry is moving to the industrials sector. 

Eight S&P 500 stocks from the data processing & outsourced services subindustry will move to the newly created transaction and payment processing services subindustry in the financials sector. The affected securities include Visa Inc., Mastercard Inc., PayPal Holdings Inc., Fiserv Inc., Fidelity National Information, Global Payments Inc., FleetCor Technologies Inc. and Jack Henry & Associates Inc. Each of the stocks will have larger weightings within their new sector.  

Another three stocks will be moved to the industrials sector, with Automatic Data Processing and Paychex Inc. being moved to human resources & employment services and Broadridge Financial Solutions Inc. still falling within the data processing & outsourced services subindustry, but in industrials. Again, all of the affected stocks will see their weights increase in their new classification.  

Finally, three stocks in the S&P 500 index will move from the consumer discretionary sector to the consumer staples sector, having been reclassified from the general merchandise stores subindustry to the consumable merchandise retail subindustry. Those stocks include Target Corp., Dollar General Corp. and Dollar Tree Inc.  

The outcome of such changes will affect a number of ETFs, including the Select Sector SPDRs ETF family. Those include the $41 billion Technology Select Sector SPDR Fund (XLK), the $33.7 billion Financial Select Sector SPDR Fund (XLF), the $16.5 billion Consumer Staples Select Sector SPDR Fund (XLP), the $14.8 billion Industrial Select Sector SPDR Fund (XLI) and the $13.9 billion Consumer Discretionary Select Sector SPDR Fund (XLY)

 

Contact Heather Bell at [email protected] 

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.