XLK - These ETFs are in focus amid upcoming GICS sector reclassification

2023-03-06 09:15:37 ET

A reclassification within the Info Tech and Financial sectors is set to take place later this month, an event that could have an impact on key exchange traded funds related to those market segments.

GICS, a common standard often used as a benchmark for determining the sectors a company belongs to, will undergo a reclassification on March 17. The process will send eight tech names to the financial sector.

Here are the names set to be impacted by the reclassification:

• Visa ( V )
• Mastercard ( MA )
• PayPal ( PYPL )
• Fiserv ( FISV )
• Fidelity National Information Services ( FIS )
• Global Payments ( GPN )
• FLEETCOR Technologies ( FLT )
• Jack Henry & Associates ( JKHY )

The move will not only directly affect the underlying names but also the exchange traded fund marketplace, as many sector funds will also notice a shake up with holdings.

The two largest tech and financial ETFs that will most certainly come into play are the Technology Select Sector SPDR ETF ( NYSEARCA: XLK ) and the Financial Select Sector SPDR ETF ( NYSEARCA: XLF ). XLK currently manages $42.70B assets under management while XLF oversees $33.23B.

Regarding the shakeup, Wells Fargo outlined in a note to its clients: “We believe the reshuffling will make the XLF ETF (Financial Sector SPDR) marginally less interest rate / credit-sensitive, and somewhat more Growthy. The XLK ETF (Technology Sector SPDR) becomes a pure-play Tech ETF, with a bit more beta.”

The financial institution added: “Longer term, we would expect correlations between Fin Tech and the rest of the Financials space to increase, not only due to sector/ETF flows but also because active PMs will be compelled to analyze and trade the names relative to each other.”

In broader financial news, major market averages remain relatively unchanged as investors eye jobs data later this week.

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