S&P Dow Jones Indices Put New Emphasis on Real Estate

Real estate could soon be treated as its own sector by S&P Dow Jones Indices—possibly as soon as late 2016. 

Until now, these companies have been included in the financials sector. The change comes after S&P Dow Jones and MSCI Inc. completed their annual review of the Global Industry Classification Standard structure. Real estate would become the 11th officially recognized sector.

“Feedback from the annual GICS structural review confirmed that Real Estate is now viewed as a distinct asset class and is increasingly being incorporated separately into the strategic asset allocation of asset owners,” said Remy Briand, managing director and global head of equity research at MSCI.

“Investors told us that there are significant differences between public Real Estate and Financial companies and therefore Real Estate deserves a dedicated GICS Sector. Today’s announcement ensures that GICS continues to be the most accurate, complete and standard industry analysis framework for investment research, portfolio management and asset allocation.”

S&P Dow Jones will refer to the real estate investment trust (REIT) industry as equity real estate investment trusts. Mortgage REITs won’t be counted under the new real estate sector; they’ll continue to be considered part of the financials sector.

The official timing of the move won’t be announced until March, after market participants have been able to give feedback on the proposal.

Article Compliments of Community Investor Magazine