The “magnificent seven” now account for 29% of the market value of the S&P 500, and a whopping 61% of the NASDAQ 100
100, up from 20% and 53%, respectively, at the start of the year.
Nasdaq is therefore stepping in to alleviate the discomfort. As Cameron Lilja, who runs its indexing operations, notes, the100 is a “modified market-capitalisation weighted” measure. This means the weights assigned to firms’ shares are usually in proportion to each company’s total market value, but that those of the biggest firms can be scaled back if they come to represent too much of the index.
The result will be a more balanced index, but also some difficult questions about just how passive “passive investing” really is. The biggest fund tracking theTrust”, invests more than $200bn . Following the rebalancing, it will need to quickly sell large volumes of shares in its biggest holdings and buy more in its smaller ones. It is hard to argue that such a move simply tracks the market rather than—at the margins, at least—influencing it.
Danmark Seneste Nyt, Danmark Overskrifter
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