Barclays Global Investors to Rebalance MSCI iShares Early


Barclays Global Investors (BGI) says it will rebalance its iShares exchange-traded funds (ETFs) pegged to MSCI indexes by the end of August 2001. MSCI is adjusting its equity indexes for free-float weighting and broader market coverage, and will complete the switch by the end of May 2002.

Last month, MSCI released a Provisional Index series with constituents to give managers a picture of what the adjusted indexes will look like - and to provide them with the option of rebalancing early. Apparently, BGI doesn't see much sense in waiting around.

"The new Provisional Indexes are better benchmarks because of the increased coverage," said Steven Schoenfeld, head of international equity management at BGI. "Before, you had the 'Swiss cheese effect' because the index was missing stocks and had holes in it."

Schoenfeld also noted that it should be harder for active managers to beat the adjusted MSCI indexes because they will reflect more of the entire investable universe.

BGI said the early iShares rebalancing would also provide the industry with cost-efficient vehicles to manage the transition, and would also benefit new investors in the 21 iShares that track MSCI indexes.

BGI currently manages 78 of the 133 ETFs worldwide, and at the end of May assets under management for all iShares broke $10 billion.

The table below shows how the biggest players stack up in terms of market share in U.S.-based ETFs.

# of U.S. ETFs
Approx. net assets
U.S. market share
State Street Global
Bank of NY
Barclays Global

Source: State Street Global Advisors, as of 5/31/2001

The Vanguard Group, which recently stepped into the ETF ring, isn't included on the above table, but that may change in the future as the indexing giant continues to roll out more of its VIPERs.

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