Real estate has become a separate sector in the Global Industry Classification Standard from its previous position of an Industry Group in the financial sector, thanks to S&P Dow Jones and MSCI Indices. The change is going to affect those who invest in financial sector ETFs when it becomes effective on 16 September. The addition of real estate in the GICS means that now there are 11 sectors in it. The GICS framework was introduced in 1999 and this is its first alteration.
Real estate becoming a sector of its own has had its repercussions throughout the global financial world. Financial sector ETFs associated with MSCI and S&P Dow Jones Indices have affected ETF issuers in Asia, USA, Europe and the other places in the rest of the world.
In Europe, though, a different approach is being taken by SSGA. An equivalent of the US real estate ETF does not exist here. So the issuers in Europe are considering the index reclassification of real estate as a re-balance. According to the manner in which the index has been reconstituted, SSGA will trade the real estate stocks that are considered to be ‘ejected’.
The changes will have a positive impact on the performance numbers of the ETFs. The performance of the two sectors of real estate and financials have always been very different and will continue to be so. In 2016, it has been noticed so far that the real estate sector has outperformed the financial sector. Fidelity believes that the financial sector will become a lot more volatile and will return long term interest rates.