The large-cap technology sector is expected to see a bump in its growth weighting when index provider FTSE Russell completes the annual refresh of its benchmarks next Friday, a move that could lift tech shares targeted in the rejig.
The increased significance of tech comes on the heels of an about 20% gain in the sector this year which led to a pull back over the last week.
Big day
FTSE Russell finalizes its annual refresh of its widely-followed indexes on June 23, a move that prompts fund managers to adjust their portfolios to reflect new weightings. Large-cap tech is expected to see a more than 3% weighting increase in Russell’s growth index, a major benchmark for portfolio managers. After a brief classification as a partial value stock last year, Apple Inc. is set to be once again classified as 100% growth.
Some managers may be uncomfortable about having such a heavy growth weighting in tech, but they will have little leeway if they are benchmarked to a universal index.
At the other end of the spectrum, large-cap healthcare and consumer discretionary are expected to see the biggest weighting bumps in Russell’s value category according to Jefferies, with increases of 2.6% and 2.4%, respectively.
“If you think of style, you think of whatever has worked in the year goes back to growth and whatever hasn’t worked goes back to value,” said Steve DeSanctis, equity strategist at Jefferies. “Its not a fair assessment, but at the margin that is kind of the driver.” Investors looking to trade on volatility may find some relief on June 23 when Russell’s refresh typically drives the largest trading day of the year. Credit Suisse currently anticipates roughly $49 billion in share turnover for this year’s rebalance.
FTSE Russell maintains some of the most widely followed benchmarks with $8.6 trillion in assets tracking or invested in products that follow its indexes, according to the firm.