RE:Added to S&P/TSX IndexHere's the potential impact. GLTA
With the growth of index funds and other passive investing strategies, whether a stock is part of a major index can have a meaningful effect on share prices. Fund managers who track an index need to hold shares in the companies. Canadian stocks added to the composite, which has about 230 to 250 members, depending on the quarter, can see a price bump before and even after inclusion. Similarly, companies removed from the index lose a source of demand for their shares.
S&P Dow Jones Indices uses “float” – the value of shares that aren’t held by insiders and therefore trade frequently and are easily available to the public – to judge whether a company should be included in its indexes.
Research by Morningstar Direct for The Globe and Mail found Canadian mutual funds and exchange-traded funds with assets under management totalling $234-billion had returns that were 95 per cent or more correlated with the S&P/TSX Composite over the 12 months ended June 30, 2021. This included funds that explicitly say they track the index.
The changes take effect prior to the open of trading on Sept. 19.