This ETF took in $135M ahead of index reorganization
Investors are starting to shift their cash to maintain exposure to some big tech names like Facebook, Google parent Alphabet and Netflix before indexers reclassify the stocks.
The fund’s portfolio management team began dumping exposure to the social media giant in light of the Cambridge Analytica scandal.
Even momentum, which has made money in eight of the last 10 years, has plunged in 2019.
The fund recorded its biggest inflow since inception a week before plans from the S&P and MSCI to group together internet and media stocks.
State Street’s Communication Services Select Sector SPDR Fund (XLC) took in $135 million last week, the most since the ETF was launched in June. Last November, S&P Global Ratings and MSCI, two of the world’s biggest index providers, announced that they were reorganizing sectors by combining phone companies with some internet and media stocks — such as Facebook and Netflix — into a new group called communication services.
The moves are scheduled to take effect on Monday. State Street designed XLC to reflect this restructuring of the Global Industry Classification Standard (GICS).
In light of the changes, the third largest ETF issuer also is rebalancing its Technology Select Sector SPDR Fund (XLK) and Consumer Discretionary Select Sector SPDR Fund (XLY). The technology fund will dump its holdings of Facebook and Alphabet and the consumer discretionary fund will unload its positions in Netflix, Walt Disney and Comcast.
“Institutional investors that use sector ETFs are getting in front of the GICS implementation,” said Todd Rosenbluth, director of ETF and mutual fund research at CFRA Research. “XLC will be the only way to get Facebook, Google and Netflix exposure through a State Street ETF.”