What advisors need to know about changes to the GICS structure

The S&P Dow Jones and MSCI indices have conducted their annual review of the structure of the Global Industry Classification Standard, which has resulted in changes to the current structure.

The GICS review is the result of consultation with market players. Various GICS industry and sub-industry names will be updated to increase clarity and consistency in the GICS structure, in addition to other changes. These changes to the GICS structure will be implemented in the GICS Direct and S&P DJI indices after the close of business (ET) on March 17, 2023.

The annual review of the GICS methodology aims to ensure that the GICS structure continues to appropriately represent global equity markets and thus enables asset owners, asset managers and investment research specialists to make consistent global comparisons by sector, according to a statement from the companies. .

The new GICS structure will include 11 sectors, 25 industry groups, 74 industries and 163 sub-industries.

Classification of retailers

S&P DJI and MSCI will end internet retail and direct marketing and categorize businesses based on the nature of the goods sold, merge general merchandise stores and department stores into a new sub-industry called Broadline Retail, will move sellers of consumable goods to the consumer staples sector, and update the GICS nomenclature for certain retail classifications by replacing the word “stores” with “retail,” according to a statement from the companies.

Classification of data processing and outsourced services

The data processing and outsourced services sub-industry of the information technology sector will be removed and moved to the industrial sector with an updated definition.

In addition, transaction and payment processing companies will be reclassified into a newly created sub-industry called Transaction and Payment Processing Services in Finance. Payroll processing businesses will be transferred to the industries sector under the human resources and employment services sub-industry with an updated definition. Companies offering travel-related data processing and outsourced services will be transferred to the consumer discretionary sector under the hotels, resorts and cruise lines sub-industry, according to a statement from the companies.

Classification of Banks and Thrifts & Mortgage Finance

There will be no change in the diversified banking sub-sector, savings/thrift banks will be merged with regional banks, and the change for the savings and mortgage financing sub-sector will be implemented as proposed, according to a statement from the companies.

Classification of Equity Real Estate Investment Trusts (REITs)

It was proposed that Residential REITs be split into two separate sub-sectors and Specialty REITs be split into five sub-sectors. In addition, eight industries for REITs and a new industry group for equity REITs will be created. A new real estate management and development industry group and a new industry will also be created, according to a statement from the companies.

Classification of transport

The trucking sub-industry will be split into two new sub-industries called passenger ground transportation and freight ground transportation. For clarity, the airlines industry and sub-industry will also be renamed as passenger airlines to better reflect the businesses classified there, according to a statement from the companies.

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