The structure of GICS (Global Industry Classification Standard) and the S&P 500 index?

Key points

  • Companies within the IT, telecommunication and consumer discretionary sectors have evolved to meet consumer demand.
  • This evolution is impacting the how index providers like S&P structure their indices.
  • iShares explores how these changes will impact one of the world’s best known indices, the S&P 500.

The way people communicate is impacting how the S&P 500© index is constructed

Capital at risk. All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed.

As companies evolve, the way we
classify them also needs to evolve

Changes in technology and company acquisitions have driven an evolution in the mode in which people communicate and access entertainment content and information.

leftblockquote

The internet began as a technological approach to sharing information; it has become the way many businesses operate... The lines among media, communications, and content are blurred. It is time to acknowledge this convergence and the overlapping services these companies provide.

rightblockquote

David Blitzer, Chairman of the Index Committee
at S&P Dow Jones Indices

How is this evolution impacting how indices like the S&P 500 are constructed?

  • In 1999, MSCI and S&P developed the Global Industry Classification Standard (GICS©), creating a universal standard for categorizing companies into sectors and industries.
  • As part of the 2017 annual review, it was decided that the GICS structure needed to change in order to reflect how companies in the communication sector have evolved.
  • The key change was that to replace the Telecommunication sector with a new Communication Services sector.
  • The changes will be implemented in S&P Dow Jones Indices as of the close on September 21, 2018 to coincide with the annual rebalance, and in MSCI equity indexes as part of the November 2018 Semi-Annual Index Review.

Read on to learn how these changes will impact the companies and sectors in the S&P 500.

How do these changes affect the S&P 500?

GICS changes will affect approximately 11% of the S&P 500

1

The Telecommunication
Services Index will be renamed
and rebranded as the
Communication Services Index

2

6 companies will move from
the Information Technology
Index to the new
Communication Services Index

3

1 company will move from
the Information Technology
Index to the Consumer
Discretionary index

4

13 companies will move from
the Consumer Discretionary
Index to the new
Communication Services Index

Source: BlackRock, S&P Dow Jones Indices and MSCI as of July 2018.

Which S&P 500 companies are moving?

Click the ? to see which companies are moving.
BEFORE
21 September 2018
Information Technology
71
26%
companies
of the S&P 500
Telecommunication Services
3
2%
companies
of the S&P 500
Consumer DiscretionaRY
76
13%
companies
of the S&P 500
AFTER
21 September 2018
Information Technology
64
20%
companies
of the S&P 500
communication Services
22
11%
companies
of the S&P 500
Consumer DiscretionaRY
65
10%
companies
of the S&P 500
6 Companies
?
3 Companies
?
13 Companies
?
1 Company
?
X
  • Twitter
  • Alphabet
  • Facebook
  • Take-two interactive software
  • Activision Blizzard
  • Electronic Arts
  • AT&T
  • Centurylink
  • Verizon Communications
  • Discovery Communications
  • Walt Disney
  • CBS Corporation
  • Viacom
  • Netflix
  • IPG
  • News Corp
  • Tripadvisor
  • DISH Network Corp
  • Charter Communications
  • Omicom Group
  • 21st Century Fox
  • Ebay

Source: BlackRock, S&P Dow Jones Indices and MSCI as of July 2018.

Investing in the S&P 500 with iShares

If you decide you would like to gain exposure to the S&P 500 index, an ETF could offer an efficient way of doing so. ETFs are designed to track the performance of an index – thereby providing exposure to many different securities in a single investment. It is not possible to invest directly in an index.

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