MSCI Index Maintenance

 

MSCI Index Maintenance

MSCI indices are maintained with the objective of reflecting, on a timely basis, the evolution of the underlying equity markets. In maintaining the MSCI indices, emphasis is also placed on continuity, replicability and minimizing index turnover. Among other things, maintaining the MSCI indices involves making: additions to and deletions from the indices, changes in number of shares, and changes in FIFs as a result of updated free float estimates.  Index maintenance can be described by three broad categories of implementation of changes: 

(i)  Semi-Annual Index Reviews (SAIRs).

The objective of the SAIRs is to systematically reassess the various dimensions of the Equity Universe for all markets on a fixed semi-annual timetable. An SAIR involves a comprehensive review of the Size Segment and Global Value and Growth Indices.

During each SAIR, the Equity Universe is updated and the Global Minimum Size Range is recalculated for each size segment. Then, the following index maintenance activities are undertaken for each market:

• Updating the Market Investable Equity Universe.

• Reassessing the Segment Number of Companies and the Market Size-Segment Cutoffs.

• Assigning companies to the size segments taking into account buffer zones.

• Assessing conformity with Final Size-Segment Investability Requirements.

(ii)  Quarterly Index Reviews (QIRs).

QIRs are designed to ensure that the indices continue to be an accurate reflection of the evolving equity marketplace. This is achieved by a timely reflection of significant market driven changes that were not captured in the index at the time of their actual occurrence but are significant enough to be reflected before the next SAIR. QIRs may result in additions or deletions due to migration to another Size Segment Index, and changes in FIFs and in number of shares. Only additions of significant new investable

companies are considered, and only for the Standard Index. The buffer zones used to manage the migration of companies from one segment to another are wider than those used in the SAIR. The style classification is reviewed only for companies that are reassigned to a different size segment.

(iii)  Ongoing event-related changes.

Ongoing event-related changes to the indices are the result of mergers, acquisitions, spin-offs, bankruptcies, reorganizations and other similar corporate events. They can also result from capital reorganizations in the form of rights issues, bonus issues, public placements and other similar corporate actions that take place on a continuing basis. These changes generally are reflected in the indices at the time of the event. The SAIR is carried out once every 6 months and implemented generally as of the close of the last business day of May and November. The implementation of changes resulting from a QIR generally occurs as of the close of the last business day of February and August. The results of the SAIR and QIR are generally announced at least ten business days in advance of implementation. 

Market Reclassifications

Potential changes in the status of countries (stand-alone, frontier, emerging, developed) follow their own separate timetables.  During an Annual Market Classification Review, MSCI analyzes and seeks feedback on those markets it has placed under review for potential market reclassification. Every June, MSCI communicates its conclusions from discussions with  the investment community on the list of countries under review and announces the new list of countries, if any, under review for potential market reclassification in the upcoming cycle. Ample lead time is provided for implementation of changes in market classification into developed, emerging or frontier status.