A significant quarterly rebalancing of the MSCI World Index is set to force substantial portfolio adjustments for index-tracking funds, including the iShares MSCI World ETF (URTH). The changes, stemming from MSCI’s latest index review, will take effect at the close of trading this Friday. This event compels passive funds mirroring the benchmark to execute obligatory purchases and sales across a wide range of securities, spotlighting which companies are entering the index and which are being removed.
Key Changes and Market Impact
The results of the review, published by MSCI on February 10, outline notable adjustments. While the broader MSCI ACWI Index sees 63 additions and 61 deletions, the focus for developed markets is on the MSCI World. A clear trend emerges in the United States, where the number of deletions substantially outweighs new entrants. Eight U.S. companies are joining, contrasted against fifteen exits.
This imbalance suggests potential selling pressure on the removed U.S. equities as ETFs offload positions, while the newly included names should benefit from forced buying activity around the implementation date.
New Entrants and Notable Exits
Major U.S. Additions:
Leading the list of U.S. firms entering the index, ranked by full market capitalization, are AST SpaceMobile A, Coherent Corp, and FTAI Aviation. They are joined by Casey’s General Stores, Curtiss-Wright, Lumentum Holdings, and Revolution Medicines.
Significant U.S. Deletions:
A longer roster of familiar names is slated for removal from the MSCI USA Index, effectively excluding them from the MSCI World as well. Prominent deletions include DocuSign, Paycom Software, Booz Allen Hamilton, Nutanix, Baxter International, Brown-Forman, and JM Smucker.
The list extends to Alexandria Real Estate, American Financial Group, American Homes 4 Rent, Bentley Systems, BXP, Dynatrace, Equity Lifestyle Properties, and Essential Utilities.
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Adjustments Across Global Developed Markets
Rebalancing activity extends beyond American borders. Several other developed markets will see changes:
* Japan welcomes two additions (Ibiden, Shimizu) and loses four constituents, including Tokyo Metro and Trend Micro.
* France adds Ayvens and FDJ United, while Edenred is deleted.
* Great Britain sees Airtel Africa included, with DCC and Hikma Pharmaceuticals removed.
* New additions also feature Verisure (Sweden), Bawag Group (Austria), and Indra Sistemas (Spain).
Context of the Current Rebalance
According to the MSCI factsheet, the estimated turnover for the MSCI World IMI is a manageable 0.3%. This indicates the overall reshuffling is relatively modest, driven more by movements between size segments than a fundamental strategic overhaul.
This review carries additional significance as it represents the final adjustment under the current index calculation methodology. MSCI will introduce an enhanced free-float rounding procedure in May. To limit “reverse turnover” ahead of this shift, the index provider stated it will only implement significant free-float changes in the February review.
Furthermore, MSCI has abandoned a previously floated idea: Digital Asset Treasury Companies (DATCOs) will not be excluded from the Global Investable Market Indexes. Firms like MicroStrategy, whose Bitcoin holdings constitute over 50% of total assets, will therefore retain their current index treatment.
For ETFs like URTH, Friday’s market close is the deadline to align their holdings with the revised index composition, typically generating elevated trading volume in the affected securities around the implementation window.
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