GICS Reveals Sector Shifts For 2023

The GICS system underlying the popular SPDR sector ETFs and other sector offerings will see several tweaks next year but won’t follow through on some of its most significant proposals to consolidate banking companies or reclassify renewable energy firms. 

A statement Thursday said the classification system administered jointly by S&P Dow Jones and MSCI will move payment processors from the information technology sector to the financials sector, amounting to the largest departure from the sector since social media giants like Meta and Alphabet were reclassified to the communication services sector four years ago.  

The payment processor reclassification affects names like Visa, Mastercard, ADP and PayPal. Those companies account for more than 5% of the weight in the Technology Select Sector SPDR Fund (XLK) and the Vanguard Information Technology ETF (VGT), which, combined, hold more than $100 billion in assets. 

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However, proposals to categorize cannabis companies under the pharmaceutical subindustry and to recategorize renewable energy companies into the power-generation-heavy energy sector were rejected based on comments from market participants. 

The reclassification in indexes will take effect after markets close on March 17, 2023, and large cap companies affected by reorganization at any classification level will be made public by the end of June this year. 
 

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